Rating — General Rate Act 1967, section 17 and Schedule 1 and section 6 — Rating of unoccupied property — Appeal by rating authority from decision of majority of the Court of Appeal dismissing their appeal against the decision of Mervyn Davies J in favour of ratepayers — Mervyn Davies J and the majority of the Court of Appeal (Dillon LJ dissenting) had held that the ratepayers were not liable to pay unoccupied property rates until the relevant hereditaments (part of the Angel Centre in Pentonville Road and St John Street, Islington) and their rateable values had been entered in the valuation list — The rating authority contended that rates were recoverable on the basis of the valuation officer’s proposal, notwithstanding the fact that the proposal was the subject of an unresolved objection — The question before the House, as formulated by Lord Bridge of Harwich, was: ‘Assuming (1) that a newly erected and completed hereditament has been the subject of a proposal by the valuation officer that it be entered in the valuation list with a certain rateable value but that this proposal is the subject of an unresolved objection, and (2) that the new hereditament has remained unoccupied for a continuous period exceeding three months so that a relevant period of vacancy under Schedule 1 has commenced, has the rating authority power to amend the rate pursuant to section 6 of the Act so as to make the owner of the unoccupied hereditament liable for rates under para 1 of Schedule 1 based on the valuation officer’s proposed valuation notwithstanding that the new hereditament has not yet been entered in the valuation list?’
that the answer to the above question was ‘Yes’, the House held that the
position was the same as it is for an occupied hereditament — In the case of a
newly erected hereditament which is in fact occupied the effect of section 6 of
the 1967 Act is to empower the rating authority to levy rates on the basis of
the value proposed by the valuation officer, despite the fact that an objection
will delay the alteration in the list required to include the new hereditament
until the local valuation court has determined the appeal against the objection
— The effect of the concluding words of para 1(1) of Schedule 1 is to enable
the rating authority to operate the interim machinery of section 6 to collect
rates due from the owner of an unoccupied hereditament at the commencement of a
‘relevant period of vacancy’ in exactly the same way as from an occupier on the
commencement of his occupation — Relevant decisions were B Kettle Ltd v Newcastle under
Lyme Borough Council and Bar Hill Developments Ltd v South Cambridgeshire
District Council — A suggestion that para 5(i) of Schedule 1 was inconsistent
with this view was rejected and the anomalies resulting from a contrary view
were mentioned — Appeal allowed against the declaration made on the ratepayers’
claim — As conceded by the appellants, their counterclaim for a declaration
that the ratepayers were liable
still outstanding in the completion notice proceedings.
The following
cases are referred to in this report.
Bar Hill
Developments Ltd v South Cambridgeshire District
Council [1979] RA 379; [1979] EGD 946; (1979) 252 EG 915, [1979] 2 EGLR
109, DC
Hastings
Borough Council v Tarmac Properties Ltd
[1985] RA 124; (1985) 83 LGR 629; [1985] 1 EGLR 161; (1985) 274 EG 925
Kettle
(B) Ltd v Newcastle under Lyme Borough Council
[1979] RA 223; (1979) 77 LGR 700; [1979] EGD 934; 251 EG 59, [1979] 2 EGLR 100,
CA
London
Merchant Securities plc v Islington London
Borough Council [1988] AC 303; [1987] 3 WLR 173; [1987] 2 All ER 961;
[1987] RA 99; [1987] 2 EGLR 162; (1987) 283 EG 954, HL
This was an
appeal by the rating authority, Islington London Borough Council, against the
decision of the majority of the Court of Appeal (Glidewell LJ and Sir David
Cairns, Dillon LJ dissenting) dismissing their appeal from the decision of
Mervyn Davies J in favour of the ratepayers, Trendworthy Two Ltd. The decision
of Mervyn Davies J was reported at [1986] 1 EGLR 187 and the decision of the
Court of Appeal at [1987] 1 EGLR 184.
Lord Silsoe QC
and Matthew Horton (instructed by the borough solicitor, London Borough of
Islington) appeared on behalf of the appellants; William Glover QC and Guy
Roots (instructed by Michael Conn & Co) represented the respondents.
In his speech,
LORD BRIDGE OF HARWICH said: This appeal arises in the course of a long-running
dispute between the developers of a modern office complex called the Angel
Centre in Islington and the Islington London Borough Council as the rating
authority. The complex comprises two buildings with net office floorspace of
162,000 sq ft and 12,000 sq ft respectively. The smaller building was first
occupied on July 9 1984, the larger on April 29 1985. The dispute relates to
the rates claimed to be payable by the respondent pursuant to para 1 of
Schedule 1 to the General Rate Act 1967 in respect of periods prior to those
dates when the buildings were unoccupied. One aspect of the dispute has already
engaged the attention of your Lordships’ House in London Merchant Securities
plc v Islington London Borough Council [1987] 3 WLR 173. Much of the
relevant history is recounted in my speech in that case. I must now briefly
recapitulate that history and amplify it by reference to events not relevant to
the earlier appeal but relevant to the issues now falling for determination.
It is common
ground that the present respondent was the ‘owner’ of the two buildings as
defined in Schedule 1 at all material times prior to their occupation. London
Merchant Securities plc, an associate company of the present respondent, was
treated as owner in the earlier proceedings, but nothing turns on this. To
avoid confusion, I shall refer to the parties treated as owners in the
different proceedings as ‘London’ and ‘Trendworthy’ respectively. In June 1983
the rating authority served on London a completion notice under para 8 of
Schedule 1 specifying September 1 1983 as the date when the Angel Centre was to
be treated for the purposes of Schedule 1 as completed. London appealed against
the notice. On March 24 1984 the valuation officer made proposals pursuant to
section 69 of the Act of 1967 to include both the larger and the smaller
buildings comprised in the Angel Centre in the valuation list as office
hereditaments with rateable values of £579,638 and £43,722 respectively.
Trendworthy duly gave notice of objection to these proposals pursuant to
section 70. On December 21 1984 London’s appeal against the rating authority’s
completion notice was dismissed by Judge Marder QC in the Clerkenwell County
Court. The rating authority thereupon demanded rates from Trendworthy as the
owner of the unoccupied buildings pursuant to para 1 of Schedule 1 for the
period commencing on December 1 1983 and ending, in the case of the smaller
building on July 9 1984, in the case of the larger building on March 31 1985,
the end of the rating year 1984-85. The basis of these demands was, first, that
pursuant to para 8(5) of Schedule 1 the buildings were for the purposes of
Schedule 1 to be treated as completed on September 1 1983 and pursuant to para
7 were deemed to become unoccupied on that date, second, that a ‘relevant
period of vacancy’ as defined in Schedule 1 accordingly began on December 1
1983 and, third, that the rating authority were entitled to amend the rate
pursuant to section 6(1)(c)(i) of the Act of 1967 as if the new
buildings had come into occupation on that date so as to charge Trendworthy
with rates under para 1 of Schedule 1 in conformity with the valuation
officer’s proposed alterations of the valuation list and in reliance on section
6(2)(b).
In February
1985, following an abortive attempt by the rating authority to wind up
Trendworthy for non-payment of the rates claimed, Trendworthy commenced the
present action in which the only relief claimed which is material to the
present appeal was a declaration that Trendworthy was not liable to pay rates
in respect of the unoccupied buildings until the relevant hereditaments and
their respective rateable values had been entered in the valuation list. The rating
authority counterclaimed a declaration that Trendworthy was liable to pay the
rates as demanded on December 21 1984. Meanwhile, London had appealed against
the decision of Judge Marder in the completion notice proceedings. In July 1985
the appeals to the local valuation court consequent upon Trendworthy’s
objections to the valuation officer’s proposals to alter the valuation list
were adjourned sine die and still stand adjourned. To date, therefore,
neither building is a hereditament included in the valuation list.
The two sets
of proceedings, namely, London’s appeal in the completion notice proceedings
and Trendworthy’s action, have since continued to run their respective courses
concurrently. The Trendworthy action was heard by Mervyn Davies J on October 31
1985. He granted the declaration claimed by Trendworthy and dismissed the
rating authority’s counterclaim. London’s appeal against Judge Marder’s
decision in the completion notice proceedings was heard by the Court of Appeal
on March 24 1986 and was partially successful. An appeal by the rating
authority from the judgment of Mervyn Davies J in Trendworthy’s action was
dismissed by the Court of Appeal on March 5 1987 by a majority, Glidewell LJ
and Sir David Cairns, Dillon LJ dissenting. London’s further appeal to this
House in the completion notice proceedings was the subject of the judgment
already referred to delivered on May 20 1987 [1987] 3 WLR 173. The rating
authority now appeal in the Trendworthy action by leave of the Court of Appeal.
The effect of
the decision of your Lordships’ House in London’s appeal in the completion
notice proceedings is to raise a number of difficult questions which may bear
upon issues arising in the present appeal, but to which for obvious reasons
neither of the courts below have directed their attention. In the completion
notice proceedings both Judge Marder and the Court of Appeal upheld the
contention of the rating authority that, in calculating the notional completion
date of the Angel Centre buildings, the period reasonably required for the
fitting-out works necessary to make the buildings ready for occupation as
offices was taken to begin on March 1 1983. Judge Marder accepted the rating
authority’s case that the period reasonably required for the fitting-out works
was six months. It was on this basis that he reached the conclusion that
September 1 1983 was the appropriate notional completion date and accordingly
dismissed London’s appeal against the notice. London had contended for a period
of 12 months. The Court of Appeal remitted the case to Judge Marder to
redetermine the length of the period reasonably required, holding that he had
misdirected himself in one respect. But, for the reasons explained in my speech
in the London case, this House allowed London’s appeal on the ground that the
commencement date for calculating the period reasonably required for
fitting-out works was not March 1 but September 1 1983 and ordered retrial of
the issue as to how long a period was reasonably required in the light of any evidence
led by either party with respect to the fitting-out works which were in fact
subsequently carried out. That issue still remains unresolved. The relevant
facts in the subsequent history are not agreed with respect to the smaller
building, but it is common ground that no fitting-out works had been commenced
in the larger building before the end of March 1984.
It is in these
circumstances, very properly conceded by Lord Silsoe QC for the rating
authority, that they cannot now seek any relief on their counterclaim in the
present proceedings. Until the outstanding issue in the completion notice
proceedings has been resolved and the notional date of completion of the Angel
Centre has been determined pursuant to para 8 of Schedule 1, there can be no
means of quantifying any liability of Trendworthy under para 1 of Schedule 1
because the amount of any such liability must depend on the consequential date
when the relevant period of vacancy began. But, more fundamentally, the
possibility that the notional completion date may in due course be determined
to be a date later than March 24 1984 raises a doubt as to whether the
valuation officer had any power on that date to make proposals to include
either building in the list as an office hereditament. So far as the larger
building is concerned, it was not, on the agreed facts, then actually complete
or ready for
as completed for the purposes of Schedule 1 pursuant to para 8(5), it must be open
to argument that the valuation officer’s proposal was a nullity. It is to be
noted in this connection that para 6 of Schedule 1 makes express provision to
authorise the making of a proposal to include in the valuation list an
uncompleted building which will, when completed, be a newly erected
dwelling-house and to ascribe to it such value as will be appropriate when the
building is completed. Para 11 then appears to contemplate that this notional
anticipatory valuation of an uncompleted dwelling-house may be altered when the
building is completed and any rates paid under para 1 of Schedule 1 based on
the anticipatory valuation adjusted in accordance with the valuation of the
completed building. There are no comparable provisions relating to hereditaments
other than dwelling-houses. The presence in the Schedule of these special
provisions relating to uncompleted dwelling-houses may raise further difficult
questions as to the proper basis of valuation of a hereditament of any other
class in pursuance of a proposal to enter it into the valuation list at a time
when it is in fact uncompleted, eg the empty shell of a shop with no shop front
or shop fittings, but is to be treated as completed for the purposes of
Schedule 1 pursuant to para 8.
My Lords, I
have referred to the matters discussed in the foregoing paragraph because some
attention was directed to them in the course of the argument and it is
important to recognise, as Lord Silsoe realistically did, that even in deciding
this second appeal to the House your Lordships are in no position to achieve
any finality between these parties. There are still many points of possible
difference which are not capable of resolution in the present proceedings,
which have not, therefore, been fully argued and on which it would be quite
wrong to express even tentative opinions. But Lord Silsoe contended, as I think
rightly, that these uncertainties do not prevent the House from deciding the
main issue raised by the rating authority’s appeal against the declaration made
in favour of Trendworthy, which will be an important issue if, as may turn out
to be the case, the valuation officer’s proposals made on March 24 1984 were
valid proposals to include the two buildings in the valuation list and to value
them as office hereditaments.
The main issue
raises what seems to me a very short point of construction. The question may be
stated as follows: assuming (1) that a newly erected and completed hereditament
has been the subject of a proposal by the valuation officer that it be entered
in the valuation list with a certain rateable value but that this proposal is
the subject of an unresolved objection, and (2) that the new hereditament has
remained unoccupied for a continuous period exceeding three months so that a
relevant period of vacancy under Schedule 1 has commenced, has the rating
authority power to amend the rate pursuant to section 6 of the Act so as to
make the owner of the unoccupied hereditament liable for rates under para 1 of
Schedule 1 based on the valuation officer’s proposed valuation notwithstanding
that the new hereditament has not yet been entered in the valuation list?
Section 6 of
the Act of 1967 provides, so far as relevant:
(1) Subject to the provisions of this section,
the rating authority may at any time make such amendments in a rate . . . as
appear to them necessary in order to make the rate conform with the enactments
relating thereto, and in particular may:-
(a) . . .
(b) . . .; or
(c) make such additions to or corrections in the
rate as appear to the authority to be necessary by reason of:-
(i) the coming into occupation of any
hereditament which has been newly erected . . .
(2) Where the effect of the amendment would be
either:-
(a) . . .; or
(b) to charge to the rate a hereditament not
shown . . . in the valuation list, the rating authority shall not make any
amendment of the rate unless . . . a proposal for a corresponding alteration to
the valuation list has been made by the valuation officer; and if effect, or
full effect, is ultimately not given to such a proposal, and the amount of the
rate levied in pursuance of the amendment is affected, the difference:-
(i) if too much has been paid, shall be repaid
or allowed; or
(ii) if too little has been paid, shall be paid
and may be recovered as if it were arrears of the rate.
The effect of
section 6 in the case of a newly erected hereditament which is in fact occupied
is to enable the rating authority to levy rates from the occupier on the basis
of the value proposed to be ascribed to the new hereditament in the valuation
list pursuant to the valuation officer’s proposal notwithstanding that an
objection to that proposal will delay the making of any alteration in the
valuation list to include the new hereditament until the local valuation court
has determined the appeal against the objection under section 76 of the Act.
This accords with the decision of the Court of Appeal in B Kettle Ltd v Newcastle
under Lyme Borough Council [1979] RA 223 and seems to me plainly right.
Section 6 was aptly described by Dillon LJ, in his dissenting judgment in the
Court of Appeal, as providing ‘interim machinery’ for the collection of rates
in respect of a newly erected hereditament pending the determination, in
accordance with Part V of the Act, of the appropriate value to be entered in
the valuation list. Once that value has been determined, any overpayment or
underpayment will be adjusted pursuant to section 6(2).
The owner of
an unoccupied hereditament is made liable by para 1(1) of Schedule 1, subject
to the provisions of the Schedule, to be:
rated in
respect of that hereditament for any relevant period of vacancy; and the
provisions of this Act shall apply accordingly as if the hereditament were
occupied during that relevant period of vacancy by the owner.
The simple
argument for the rating authority is that the concluding words of para 1(1) of
Schedule 1 enable the rating authority to operate the interim machinery of
section 6 to collect rates due from the owner of an unoccupied hereditament on
the commencement of a relevant period of vacancy in exactly the same way as
from an occupier on the commencement of his occupation. Whenever there is a
relevant period of vacancy, the provisions of the Act apply as if the
hereditament were occupied by the owner. Upon the commencement of a relevant
period of vacancy, therefore, there is a hypothetical commencement of
occupation by the owner and, subject to the provisions of Schedule 1, this
brings into operation all relevant provisions of the Act, including section 6,
which govern rateability in respect of the first occupation of a new
hereditament. On the face of it, this seems to me to be the consequence of
applying the language of the statute according to its ordinary meaning. This
was the view taken by the Divisional Court of the Queen’s Bench Division in Bar
Hill Developments Ltd v South Cambridgeshire District Council [1979]
RA 379.
It is said,
however, on behalf of the respondents, that this result would conflict with
para 5(1) of Schedule 1, which provides:
Subject to
the provisions of this Schedule, the rateable value of a hereditament for the
purposes of paragraph 1 thereof shall be the rateable value ascribed to it in
the valuation list in force for the area in which the hereditament is situated
or, if the hereditament is not included in that list, the first rateable value
subsequently ascribed to the hereditament in a valuation list in force for that
area.
It is correct
that in certain respects this paragraph in Schedule 1, in its application to
the rating of unoccupied property, overrides certain provisions of the Act.
Thus, by section 79(1) an alteration of the valuation list, in the ordinary
case, operates retrospectively to govern the rates payable in and after the
rate period in which the proposal was made, but does not apply retrospectively
to any earlier rate period. It was, however, held by the Court of Appeal in Hastings
Borough Council v Tarmac Properties Ltd [1985] RA 124, rightly in my
view, that by the language of para 5(1) of Schedule 1 the first rateable value
ascribed to a new hereditament in the valuation list in consequence of a
proposal made many years after its completion operated retrospectively to
determine the liability of the owner from the commencement of the first
relevant period of vacancy. However, I can find nothing in the language of para
5(1) of Schedule 1 which is in any way inconsistent with the application to an
unoccupied hereditament on the commencement of a relevant period of vacancy of
the interim collection machinery provided by section 6 of the Act pending
determination of the proper rateable value to be ascribed to the hereditament
pursuant to the valuation officer’s proposal.
I reach this
conclusion in favour of the rating authority on what seems to me the plain
meaning of the statutory language. But I find reinforcement for the conclusion
in the anomalies which must result if the language, as the judge and the
majority of the Court of Appeal thought, will not bear this meaning. There is
no doubt that, if a new building is occupied and a proposal to enter it in the
valuation list is made by the valuation officer but is objected to, the rating
authority can amend the rate under section 6 to levy rates from the occupier.
But suppose that after a short time the occupier leaves and three months later
a relevant period of vacancy commences. The rate having already been amended,
it would seem to me absurd that the owner should, in these circumstances, be
exempt from any liability under Schedule 1 until the appeal against the
objection has been
QC accepted, is the necessary consequence if his argument for the respondent
prevails.
Again, section
18 of the Act makes various provisions governing liability for rates in respect
of occupation of a hereditament for part only of a rate period. I refer, in
particular, to section 18(4) which provides:
A person who
is in occupation of the hereditament at any time after the rate is made may be
assessed to and shall in the first instance be liable to pay:-
(a) if he was in occupation at the beginning of
the rate period, the whole of the amount charged in respect of that hereditament;
or
(b) if he came into occupation subsequently, a
proportion of the amount aforesaid calculated on the basis that he will remain
in occupation until the end of the rate period,
but shall, if
he goes out of occupation before the end of that period, be entitled to recover
from the rating authority any sum paid by him in excess of the amount properly
chargeable against him in accordance with the provisions of subsection (2) of
this section, except in so far as he has previously recovered that sum from an
incoming occupier.
It seems to me
inescapable that, in the application of this provision, the concepts of ‘coming
into occupation’ and ‘going out of occupation’ must, by virtue of the
concluding words of para 1 of Schedule 1, determine an owner’s liability for
rates in respect of an unoccupied hereditament as if they applied to the
beginning and ending of a relevant period of vacancy. In this context any other
construction would make the provision quite unworkable. Yet the restrictive
construction of para 1 of Schedule 1 for which Mr Glover contends would
preclude the application of section 18(4) to an owner’s liability under
Schedule 1 as effectively as it is alleged to preclude the application of
section 6.
I would
accordingly allow the rating authority’s appeal against the declaration made on
Trendworthy’s claim but dismiss it so far as it relates to the rating
authority’s counterclaim.
LORDS LOWRY,
BRANDON OF OAKBROOK, GRIFFITHS and GOFF OF CHIEVELEY agreed with the
conclusions of Lord Bridge of Harwich and with the order proposed by him, and
did not add anything of their own.
