Rateability of cold store–Premises consisting of external walls of brick and concrete surrounding interior system of rooms formed from insulating panels–Arrangement of panels in theory variable at some cost in time and money, in practice ‘relatively rigid and enduring’–Store held rateable–Panels an integral structural part of the whole–Owners given leave to appeal to the House of Lords–Numerous other cases said to be awaiting the result of the appeal
This was an
appeal by Union Cold Storage Co Ltd from a decision of the Lands Tribunal on
May 2 1973 dismissing the company’s appeal from a judgment of the South-East
Lancashire Local Valuation Court and holding that a cold store at Fairbrother
Street, Salford, did not fall within the description of non-rateable plant. The
Lands Tribunal’s decision was reported at (1973) 226 EG 1965.
Mr M Chavasse
QC and Mr F A Amies (instructed by Mr R A Roberts) appeared for the appellants
and Mr A Fletcher (instructed by the Solicitor of Inland Revenue) represented
the respondent valuation officer.
Giving
judgment, BUCKLEY LJ said: This is an appeal from a decision of the Lands
Tribunal of May 2 1973 which was itself a decision on an appeal from the
South-East Lancashire Local Valuation Court. The Lands Tribunal dismissed that
appeal from the local valuation court, finding that the subject-matter of the
dispute was rateable and did not fall within the class of non-rateable plant.
The subject-matter of the case is a cold store at Salford. The character of the
building and the method of construction are described in some detail in the
case and are also illustrated in architectural drawings which are part of the
case. I do not propose to describe again in detail the character of the
building and the method of construction, but in order to make this judgment
intelligible it is necessary for me to say something about the nature of the
building.
The
hereditament itself is a piece of land greater than the site of the building
with which we are particularly concerned. It includes some open land, and it
includes some ancillary buildings with which we are not directly concerned.
Those ancillary buildings have in them offices, mess rooms, operational rooms
of one kind and another, an engine room, a workshop and so forth. There is an
open car-park area and various other open land round the building. The building
with which we are concerned is shown on drawing No 2, the external walls being
coloured red and green. They are brick and concrete walls of, I think, a
steelframe building, and the roof is corrugated. Within those external walls
there is erected insulation to keep the internal rooms inside the building
insulated from the external temperature. The insulation is shown in yellow on
the plan, and it consists of internal walls which follow the line of the
external walls, and those internal insulated walls are constructed of insulated
panels which are fixed to the external walls by means of rails which are
attached to the external walls at three levels running round the building, one
rail near the ground level, one about half-way up and one near the ceiling, and
the insulated panels are attached to these rails by cleats which are screwed
into the panels. This method of construction results in there being an air
space between the internal insulated wall and the external wall, a gap of a few
inches. The building has some doors leading to the open constructed of
insulated panels. The ceiling of the building is also constructed of insulated
panels which are suspended by a rather similar method of attachment to that
employed for the upright walls which I have mentioned, but in this case the
attachment is to steel joists suspended from the roof girders.
The interior
area of the building is divided into 16 chambers or rooms, and they are divided
from one another and from a corridor which forms part of the area by walls also
formed of insulated panels. These panels are slotted into the ground and
slotted into grooves in the ceiling of the insulation assembly. The insulated
panels have a groove down each edge, and where one panel adjoins another panel
a wooden tongue or batten is inserted along the length of that groove, which
fits into the groove in one panel and into the groove in the adjoining panel,
so connecting the two (it could be described as a tongue), and those tongues
are fixed in position with mastic adhesive. The lower extremity of the walls
where it touches the floor of the building is protected by a cement kerb of, I
think, some 9 in to protect the foot of the panels from damage. Six
of the chambers are capable of being entered directly from the open air through
doors such as I have described; the other 10 are accessible by internal doors
either between the different chambers or between some of those chambers and the
corridor which I have mentioned. The internal walls, the perimeter walls, are
formed of 268 such panels as I have referred to. There are over 400 such panels
in the internal walls that are not perimeter walls, that is to say, the walls
dividing the rooms from one another, and there are 1,395 panels in the ceiling.
So it will be appreciated that this is an assembly of considerable size and
complexity, although its method of construction may be said to be a simple one.
The internal walls that are slotted into the floor and the ceiling are again
fixed in that position with mastic.
The tribunal
in its decision states–and this, I think, amounts to a finding of fact–that
‘the internal arrangement of the . . . rooms could in theory be varied and the
partition walls moved in order to meet a variation in demand for different
storage requirements. . . . Removal of the partitioning would involve breaking
up the kerb and the joints formed by mastic adhesive in the floor groove within
the kerb and between the panels. The battens covering the panel joints’–I have
not mentioned those, but wherever a panel adjoins another panel there is a
timber batten to cover the joint, and I think there are also intervening timber
battens on the walls–‘would also need to be removed.’ In the removal of the partitions the first
panel would need to be broken, but the remainder could be sprung out of
position after sawing through the rebates going into the floor and the roof,
and it is estimated that it would take about a month to dismantle the partition
walls if the panelling were to be reused. No change in the layout of this
assembly has ever been made, and I do not imagine that it is contemplated that
it ever will be made, but it could be made in the way which I have described.
It is common ground that if what I may call the assembly of the insulation
inside were entirely removed, the outer walls, the brick and concrete walls,
could be used as a warehouse, but the building constructed with the insulation
equipment erected inside is, of course, designed for the particular use of the
building as a cold store. I think it may be convenient to refer to the whole
complex, including the outer walls, as ‘the cold store,’ to refer to the
insulation assembly within it as ‘the assembly,’ and to call the separate rooms
‘the rooms.’
The question
which we have to consider arises under section 21 of the General Rate Act 1967,
and that section provides: ‘(1) For the purpose of the valuation of any
hereditament under section 19 of this Act otherwise than on the profits basis;
(a) subject to any order under subsection (5) of this section, all such plant
or machinery in or on the hereditament as belongs to any of the classes set out
in the statement for the time being having effect under subsection (4) of this
section shall be deemed to be a part of the hereditament; (b) except as
provided in the foregoing paragraph, no account shall be taken of the value of
any plant or machinery in or on the hereditament.’ Then subsection (3): ‘From time to time, at
such intervals as the Minister may direct, a committee consisting of five
persons appointed by the Minister shall transmit to the Minister a statement
setting out in detail all the machinery and plant which at the date of the
preparation of the statement appears to the committee to fall within any of the
classes specified in the third schedule to this Act.’ I will come to that schedule in a moment, but
first I will read subsection (4): ‘The Minister shall cause any statement
transmitted to him under subsection (3) of this section to be published in such
manner as he thinks fit and, after considering the statement and any
representations which may be made to him with respect thereto, may if he thinks
fit make an order, to come into operation on such date as may be specified therein,
confirming that statement with or without modifications; and the statement as
confirmed by the order shall as from the said date have effect for the purposes
of this section in substitution for any statement previously so having effect.’ Going back for a moment to subsection (1): ‘.
. . all such plant or machinery in or on the hereditament as belongs to any of
the classes set out in the statement for the time being having effect under
subsection (4)’ is to be deemed part of the hereditament and so will be
rateable, but no other plant is to be rateable.
The third
schedule is a schedule of ‘Classes of machinery and plant deemed to be part of
the hereditament.’ It divides such
machinery and plant up into five classes, and we are only concerned with class
4. Class 4 is: ‘Such part of any plant or any combination of plant and
machinery, including gas holders, blast furnaces, coke ovens, tar distilling
plant, cupolas, and water towers with tanks, as is, or is in the nature of, a
building or structure.’ So the function
of the committee established under section 21 (3) was to give the Minister a
statement setting out in detail all the machinery and plant which the committee
considered to fall within class 4. The relevant statement is one which is to be
found enshrined in the Plant and Machinery Rating Order 1960, in which class 4
is framed in this way: ‘The following items, except (a) any such item which is
not, and is not in the nature of, a building or structure; and (b) any part of
any such item which does not form an integral part of such item as a building
or structure or as being in the nature of a building or structure. . . .’ Then there follows a long list of items,
which includes ‘chambers, vessels and containers for’ a number of functions,
including ‘refrigeration.’ The questions
for consideration in the present case are, have we here a chamber for
refrigerating, and if so, what is it? Prima
facie any chamber for refrigerating is an item in class 4, but it is not an
item in class 4 if it falls within either of the exceptions (a) and (b) which I
have read.
The Lands
Tribunal made a finding that what I have called ‘the rooms’ were structures, or
in the nature of structures, and so could not be excluded under exception (a).
They also found that the set of external walls, or what might be called the
shell of the building, that is, the building without any insulation, was
properly to be described as a warehouse, and was not plant, but was the setting
in which a businessman installed his plant. They found that each of the rooms
formed a structurally integrated part of the assembly, that is, of the whole
complex consisting of the 16 rooms made up out of the insulation panels. The
appellants’ contentions in this court have been, first, that the Lands Tribunal
misdirected itself in failing to hold that the cold store as a whole was an
item of plant and fell within the description of a chamber for refrigerating in
class 4. The appellants submit that it is a clear inference from the facts
found that the contrary view is correct, that is to say, that the whole cold
store is in fact an item of plant, and that it is an item of plant within one
of the descriptions to be found in class 4. But they go on to say that the
assembly, the insulation, is not an integral part of the cold store as a whole,
and that all the insulation assembly consequently falls within exception (b) in
class 4 as being part of the cold store which does not form an integral part of
it as a building or structure. Therefore, they contend, none of the insulation
assembly is within class 4, and so none of it is rateable.
In connection
with the first contention of the appellants, that the cold store as a whole is
an item of plant, we have been referred to three authorities. Taking them in
order of date, they are Shellmex & BP Ltd v Holyoak [1959] 1
WLR 188, Commissioners of Inland Revenue v Barclay Curle & Co Ltd
[1969] 1 WLR 675 and Manchester Marine Ltd v Duckworth [1973] 1
WLR 1431. The first two are decisions of the House of Lords, and the third is a
decision of this court. In the first case the question was whether a tank
intended for use at a garage, which was sunk in a subterranean
and the tank being filled with sand and covered with a cement seal, was itself
a tank within the reference to ‘tanks’ in class 4, or whether the object to be
looked at as a tank for the purposes of class 4 was the cylinder with the brick
wall and the sand and cement seal. The House of Lords came to the conclusion
that it was the metal cylinder that was the tank, that that was admittedly
plant, and the rest was not a part of the tank, but was a part of the
hereditament, and so that was rateable, but the tank escaped being rateable.
‘It was a ‘tank’ housed in a structure and not part of a ‘tank’ formed by the
whole installation.’ In the second case
the House of Lords was concerned with a very much larger construction, a dry
dock, and it was a case decided not under rating law, but under revenue law: it
was an income tax case. The House there came to the decision that a dry dock as
a whole was a piece of plant and fell to be regarded as such. In arriving at
that conclusion attention was paid to the function to be performed by all the
parts of the dry dock. Some of their Lordships regarded that as a decisive
consideration, others regarded it as no more than an element to be taken into
consideration; but they came to the conclusion that having regard to the nature
of the dry dock as a whole, and the functions which it and its various parts
were designed to perform, the dry dock as a whole constituted an item of plant.
In the third case the Court of Appeal was also concerned with a dry dock. This
was a rating case. The characteristics of the dry dock there under
consideration were treated as indistinguishable from the characteristics of the
dry dock under consideration in Commissioners of Inland Revenue v Barclay,
Curle & Co Ltd. But because it was a rating case, Lord Denning, who
delivered the leading judgment, with which the two other members of the court
agreed, said that it was legitimate to consider the various component parts of
the dry dock in isolation. The court was, of course, referred to Commissioners
of Inland Revenue v Barclay, Curle & Co Ltd and the Master of
the Rolls said this: ‘Rating law is different from revenue law. The word
‘plant’ has the same meaning in each statute, but the subject-matter to which
it is applied is different. In rating cases it is permissible to split up the
dry dock into parts, but in revenue cases it is not.’ He reached the conclusion that in that case
the floor and walls of the dry dock formed part of the rateable hereditament
and did not fall to be treated as plant. He said that they were not plant at
all, but they were the structure in which the plant was housed.
We have had an
interesting argument as to how these three authorities can be reconciled, and
it may be that there are some intellectual difficulties in achieving that. But
I do not think that for the purposes of this judgment it is necessary for me to
attempt to reconcile them. The argument that the whole cold store here
constitutes an item of plant depends upon the character of the construction of
the building, and it would seem to me that it would be clearly arguable–and it
has been argued before us–that the external walls here form an essential part
of the refrigerated building as a whole, for without the external walls to
support the insulated assembly within, the latter would not be rigid enough to
stand up, at any rate for any length of time, and the building would not be an
effective building for the purposes for which it is designed. If one applies
the functional test, as it was applied in Commissioners of Inland Revenue
v Barclay, Curle & Co Ltd to the dry dock, I should, for myself,
feel no difficulty in coming to the conclusion that the building as a whole
consists of parts, all of which are necessary to complete it and to enable it
to perform the function that it is designed to perform, and that, as such, it
constitutes an item of ‘plant’ as that word has been understood and defined in Yarmouth
v France (1887) 19 QBD 647 and in Jarrold v John Good &
Sons Ltd [1963] 1 All ER 141. ‘Plant,’ it has been held, comprises all
goods and chattels, live or dead, kept for permanent employment in the owner’s
business. It does not include stock in trade, nor does it include the place
where the business is carried on. In the present case, applying that
interpretation of the word ‘plant’ to the object with which we are concerned, I
would think that the cold store as a whole represented an object which was
designed and used in the permanent employment of the owners in their business
as cold storage contractors. It seems to me to be a rather fanciful notion that
one could regard the outside walls as merely the place in which the business
was carried on, because, as I have said, it seems to me that the outside walls
are an essential part of the construction of the plant itself.
However, I do
not think that it is really necessary for us to decide even that in this case,
for I am prepared to assume in the appellants’ favour that that argument is
sound, and to go on to consider whether it can validly be said that the
insulating assembly within the building is a part of such plant which does not
form an integral part of it as a building or structure, or as being in the
nature of a building or structure. The method of construction is, as I have
said, in conception relatively simple, but it is also relatively rigid and
enduring. It is intended to assemble the whole structure as a piece of plant
for continuous use. The fact that by unscrewing a large number of screws, by
breaking open a large number of joints which have been closed with adhesive
mastic, and by breaking up the concrete kerbs at the bottom of the walls it
might be possible to disassemble the insulation does not seem to me to lead to
the conclusion that the insulation and the external walls, in fact, the whole
structure, is not an integrated whole. Certainly the insulation is a necessary
element of the whole as a cold store. But Mr Fletcher has said that he does not
contend that this question is to be answered by reference to functional
considerations. In my judgment, there is here physical integration of all the
parts of the whole cold store of a sufficiently permanent character, and
carried out in circumstances in which it seems to me clear that it was intended
to be enduring, to lead to the conclusion that here the whole structure is one
integrated whole, and that no part of the insulation can be described as part
of the whole structure which does not form an integral part of it as a
structure, or as something which is in the nature of a structure. Accordingly,
in my judgment, this appeal must fail, because it is only if the appellants can
succeed on this part of the case that the first part of the case, as to what
constitutes the item of plant, assists them at all. They must succeed on both
branches of their argument if they are to succeed in the appeal, and, in my judgment,
they fail on the second branch. I would dismiss the appeal.
ORR LJ: I
agree. I, too, having regard to the conclusion which I have reached with regard
to the issue of integration, am content to assume for the purposes of this
appeal that the Lands Tribunal was wrong in holding that the outer shell of
what has been called the complex was part of the setting in which plant has
been installed and not in itself plant. On the issue of the integration, I am
satisfied that this appeal must be dismissed for the reasons given by my Lord,
and I cannot usefully add to those reasons. I, too, would dismiss the appeal.
SIR GORDON
WILLMER: I also agree that this appeal should be dismissed, and I have nothing
to add to the reasons given by my Lord.
The appeal
was dismissed with costs. Leave to appeal to the House of Lords was granted.