Rates — Unoccupied hereditaments — General Rate Act 1967, Schedule 1, para 2(a) and (b) — Appeal by rating authority from a decision of Woolf J, who had allowed an appeal by the ratepayer company against a distress order in respect of rates alleged to be due on unoccupied premises — Rates claimed were calculated by applying to the rateable value a higher multiple than for domestic hereditaments — The present appeal related to hereditaments which had been used as offices under a number of planning permissions for limited periods and finally had become subject to a condition requiring cessation of office use — Ratepayer company, respondents to present appeal, had been successful in persuading Woolf J that by virtue of para 2(a) and (b) of Schedule 1 to the General Rate Act 1967 no rates were payable in respect of the relevant hereditaments — Respondents’ submission, which found favour with Woolf J, was that the purpose specified for these hereditaments in the valuation list was use as offices, that as a result of the conditions attached to the planning permissions use of the premises as offices was prohibited by law, that the hereditaments were therefore kept vacant by the action of a local authority, and consequently under para 2 no rates were payable — Appellant rating authority contended that Woolf J had been in error in concluding that the hereditament in Schedule 1 meant the hereditament as controlled and limited by the description in the valuation list — Held by Court of Appeal, accepting rating authority’s submissions, that ‘hereditament’ in Schedule 1 was to be interpreted as a unit of property — The description in the valuation list did not control or limit the identity of the hereditament, its purpose being to provide a basis for valuation — The reply to the objection that an owner might become liable to rates at a higher percentage than would be applicable for the only purpose for which the premises could lawfully be used was that it was open to the occupier to propose an alteration in the valuation list — The exceptions under para 2 (a) and (b) of Schedule 1 did not apply — Appeal allowed and magistrate’s order for distress restored
This was an
appeal by the rating authority, Westminster City Council, against a decision of
Woolf J in favour of the ratepayers, Hailbury Investments Ltd, allowing an
appeal by case stated from the order of a metropolitan stipendiary magistrate
that distress warrants should issue to enforce payment of unpaid rates in
respect of several unoccupied hereditaments at Albert Court, Prince Consort
Road, London SW7.
M A B
Burke-Gaffney QC and C D Newberry (instructed by T F Neville, City Solicitor,
Westminster) appeared on behalf of the appellants; C S Fay (instructed by Asher
Fishman & Co) represented the respondents.
Giving the
judgment of the court, STEPHEN BROWN LJ said: The Westminster City Council is
the rating authority for a large area of central London. It appeals to this
court from the order of Woolf J of December 1 1983 allowing an appeal by way of
case stated by the respondent ratepayer from the adjudication of Mr Edmund
Geoffrey MacDermott, a metropolitan stipendiary magistrate, of March 11 1982.
The magistrate had heard four complaints preferred by the Westminster City Council
as rating authority against the ratepayer alleging that being a person duly
rated and assessed in certain sums it had not paid the same. He ordered that
warrants to make distress of the sale of goods and chattels of the ratepayer
should be issued to enforce the payment of certain sums alleged to be due in
respect of unoccupied hereditaments at Albert Court, Prince Consort Road, SW7.
The appeal
involves consideration of certain statutory provisions contained in Schedule 1
to the General Rate Act 1967 relating to unoccupied hereditaments. Section
17(1) of the General Rate Act 1967 provides:
A rating
authority may resolve that the provisions of Schedule 1 to this Act with
respect to the rating of unoccupied property — (a) shall apply . . . to their
area, and in that case those provisions shall come into operation . . . in that
area on such day as may be specified in the resolution.
By Schedule 1,
paragraph 1(i), it is provided:
Where, in the
case of any rating area in which, by virtue of a resolution under section 17 of
this Act, this Schedule is in operation, any relevant hereditament in that area
is unoccupied for a continuous period exceeding three months, the owner shall,
subject to the provisions of this Schedule, 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.
Certain
exceptions, however, are created by para 2 of the Schedule of which those
contained in subparas (a) and (b) are relevant in considering the present
appeal. Para 2 provides:
No rates
shall be payable under paragraph 1 of this Schedule in respect of a
hereditament for, or for any part of the three months beginning with the day
following the end of, any period during which — (a) the owner is prohibited by
law from occupying the hereditament or allowing it to be occupied; (b) the
hereditament is kept vacant by reason of action taken by or on behalf of the
Crown or any local or public authority with a view to prohibiting the
occupation of the hereditament or to acquiring it.
The complaints
which came before the magistrate related to four hereditaments entered in the
valuation list for the City of Westminster. The magistrate found them to be as
follows:
(1)
Description: Ground and first-floor offices.
Address: 6
Albert Court
Rateable
value: £5,013
(2)
Description: Offices and premises ground floor (front).
Address: 57
Albert Court
Rateable
value: £2,555
(3)
Description: Basement and ground-floor offices and caretaker’s flat.
Address:
58-60 Albert Court
Rateable
value: £17,597
(4)
Description: Offices, basement.
Address: 63
Albert Court
Rateable
value: £1,347.
He further
found in para 8 of the case that at all material times each of the said
hereditaments was unoccupied; that Hailbury Investments Ltd, the respondents to
this appeal, were at all relevant times the owners of each of the hereditaments
aforesaid, being entitled to possession thereof; that the appellants in this
appeal were the rating authority for the City of Westminster and had demanded
of the respondents the respective sums specified in each of the complaints;
that the respondents to this appeal did not pay any of the sums so demanded
within seven days after the respective demand in each case, and that the rating
authority claimed to rate each of the said hereditaments pursuant to section 17
of and Schedule 1 to the General Rate Act 1967. Each of the sums claimed in
respect of each of the said hereditaments was calculated by the rating
authority by applying to the rateable value a multiplier which was higher than
that applicable to residential flats and other domestic property.
Numbers 58,
59, 60 and 61 Albert Court had been used as offices for many years prior to
December 25 1972 pursuant to a series of planning permissions authorising such
use for limited periods. The last of these permissions, dated November 27 1961,
was subject to the following condition:
The limited
period for the continuation of the use hereby permitted shall be until December
25 1972 on or before the expiration of which period the use shall be
discontinued or determined.
By a notice
dated November 15 1973 permission was refused for the continued use of 58 to 61
Albert Court as offices. On March 4 1976 a certificate of established use
within the meaning of section 94 of the Town and Country Planning Act 1971 was
granted in respect of the use of 6 Albert Court as offices. On July 13 1978 the
Westminster City Council as local planning authority granted planning
permission to the respondents in pursuance of their application dated January
10 1978 for the use of flats 60 and 61 Albert Court as offices, the use of flat
63A for residential purposes and the conversion of flats 57, 58 and 59 to
provide three self-contained residential units. The permission was subject to
the following conditions:
(1) Prior to
the commencement of the office use hereby approved for flats 60 and 61 any
existing office use in flats 3A, 6 and 63 shall cease permanently and these
flats shall be made ready for occupation as residential premises. (2) Prior to
the commencement of the office use hereby approved for flats 60 and 61 the
unauthorised office use in flats 57, 58 and 59 shall cease permanently and these
flats shall be made ready for residential occupation. (3) The development
hereby permitted must be begun not later than five years from the date of this
permission.
Before the
magistrate the ratepayer contended that it could be rated only in respect of the
hereditament which satisfied the description in the valuation list; further,
that the condition attached to the planning permission of November 27 1961
operated to prohibit by law the occupation of the hereditament 58 to 60 Albert
Court as a hereditament satisfying that description and accordingly by virtue
of paragraph 2(a) of Schedule 1 to the General Rate Act 1967 no rates were
payable under section 17, Schedule 1, of the Act in respect of 58 to 60 Albert
Court at any material time. It further contended that the conditions which I
have recited attached to the planning permission of July 13 1978 constituted
action taken by or on behalf of a local authority with a view to prohibiting
the occupation of the hereditaments concerned and that they had been kept
vacant as a result.
Accordingly,
the exception provided by paragraph 2(b) of Schedule 1 to the General Rate Act
1967 was established and no rates were payable in respect of the hereditaments
involved at any material time. The magistrate did not accept those submissions
and accordingly rejected the ratepayers’ appeal and ordered the distress
warrants to issue. He held that the local authority had not prohibited
occupation of any of the hereditaments and that all that they had done was to
restrict the nature of the occupation to that of a residential character. He
stated the question for the opinion of the High Court:
whether
planning restrictions which restrict the type of any future occupation of a
hereditament to that of a domestic nature render the hereditament subject to
the provisions of paragraphs 2(a) and 2(b) of Schedule 1 of the General Rate
Act 1967.
The ratepayer
appealed to the High Court by way of case stated and its appeal was heard by
Woolf J, who was hearing the Crown Office list. When he gave judgment he stated
the point in the following terms:
As I
understand the point it can be summarised as follows: Whether premises which
had previously been used as offices were liable to pay rates as unoccupied
offices when there was no planning permission to use the premises as offices or
where there is a condition in an existing planning permission requiring them
not to be used as offices.
Referring to
the definition of hereditament in section 115 of the General Rate Act 1967 and
to the provisions of section 16 of the Act, the learned judge stated: ‘I
identify a close relationship between the hereditament and the description of
the hereditament in the valuation list.’
He considered
the effect of the planning refusal and the condition of the planning consent to
which I have referred and stated:
In this case
the purpose specified in the valuation list was as offices and in relation to
those hereditaments where there was no longer any planning permission on the
expiry of the last of the limited planning permissions, the situation was one
where the owner was prohibited by law from occupying the premises for the
purpose described in the valuation list.
He continued:
As the rating
of the unoccupied premises would be on the basis of their use for offices where
that use is prohibited by law — and I so regard it where there is no planning
permission — it appears to me to be in accord with the proper interpretation of
paragraph 2(a) to regard the exception from unoccupied rating provided by
paragraph 2(a) as being applicable.
With regard to
flat 6 he said that the stipendiary magistrate had found as a fact that that
hereditament was kept vacant by reason of the action of the local authority in
the terms of their planning consent of July 13 1978 which required the cesser
of the use of flat 6 for offices on the conversion of the other premises
therein referred to residential purposes and the commencement of the use of
flats 60 and 61 for office purposes. He stated that:
as the
learned stipendiary magistrate has found as a fact that the hereditament was
kept vacant by reason of that action it follows therefore on that finding that
the reasoning which I have applied to the interpretation of subparagraph (a)
when applied to the subparagraph (b) means that the appeal of the owners under
that heading succeeds as well.
He accordingly
allowed the appeal of the ratepayers from the decision of the stipendiary
magistrate.
The rating
authority has appealed to this court and submits that the learned judge was in
error in concluding that the hereditament in Schedule 1 to the Act means the
hereditament as described in the valuation list and that the identity of that
hereditament is controlled and limited by whatever words may be used to
describe it in the valuation list. Mr Burke-Gaffney for the appellant rating
authority refers to the definition of ‘hereditament’ in section 115(1) of the
General Rate Act 1967:
‘Hereditament’
means property which is or may become liable to a rate, being a unit of such
property which is, or would fall to be, shown as a separate item in the
valuation list.
The vital
element of the definition, he submits, is the phrase ‘A unit of property’. The
ratepayers’ proposition accepted by the learned judge would mean that
‘hereditament’ in Schedule 1 to the General Rate Act should be defined as
‘hereditament occupied for the purpose described in current valuation list’. He
argues that it is important to distinguish the process of assessment which is a
matter for the valuation officer of the Inland Revenue from the process of the
collection of rates which is the concern of the rating authority. The valuation
list is prepared by the valuation officer for the purpose of making his
assessment. At that stage, submit the appellants, the ratepayer may object to
the valuation or seek an alteration in the description of the hereditament in
the valuation list. Para 5(1) of Schedule 1 to the General Rate Act 1967
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.
Accordingly, in
seeking to implement the provisions of section 17 of and Schedule 1 to the Act
in relation to the collection of rates on unoccupied property the rating
authority merely collects rates calculated in accordance with the basis of
assessment determined by the valuation officer of the Inland Revenue at the
time when he compiled the valuation list. If, therefore, submits Mr
Burke-Gaffney, the relevant hereditament in Schedule 1 is properly interpreted
as being the unit of property, meaning a physical unit of property, then it is
inevitable that the higher multiplier should apply to the particular
hereditament having regard to the original basis of assessment. The ratepayer
could have taken the course, he submits, of objecting to the assessment if it
were not the correct basis of assessment. The purpose of the Act and the
Schedule is to enable a rate to be levied in respect of hereditaments which are
capable of being lawfully occupied but which are left unoccupied. If the
ratepayers’ submissions as accepted by the learned judge are in fact correct,
then the anomalous situation would prevail where rates could not be levied at
all on the hereditaments in question if the occupiers chose to leave them
unoccupied and not to change their use
use. The only relevance of the valuation list was in relation to the assessment
of the rate itself. Mr Burke-Gaffney also argued that the use of the premises
for a purpose for which there was no planning permission was not a use
prohibited by law.
For the
ratepayer, Mr Fay repeated and developed the argument which he had used
successfully before Woolf J. He began by submitting that it is a fundamental
principle of rating law that a ratepayer is rated for his occupation and not
for the land or building. Further, that the mode of occupation is an essential
attribute of the hereditament, citing the case of Arbuckle Smith & Co
Ltd v Greenock Corporation [1960] AC 813 for the proposition that
occupation is ‘use of premises according to their nature’. He argued that
hereditaments must be valued rebus sic stantibus, that is to say, either
as an office or a dwelling, and therefore the possibility of an alternative
mode of use must be left out of account. He placed particular reliance upon the
judgment of Bridge LJ, as he then was, in Ravenseft Properties Ltd v Newham
London Borough Council [1976] 1 QB 464. That case involved consideration of
the provisions of para 8 of Schedule 1 which reads:
(1) 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.
A rating
authority which operated the provisions of the General Rate Act 1967 for the
rating of unoccupied hereditaments served on the owners of two new office
blocks in their area 15 completion notices under paragraph 8(1) of Schedule 1
to the Act in respect of 15 floors in those blocks. Each notice stated that the
authority being of the opinion that the erection of the building, viz each
floor, had been completed, and that each was comprised in a relevant
hereditament, it was to be treated as completed on the date of service of the
notice, with the consequence that if the notices stood the owners would become
chargeable to rates if the floors were unoccupied three months after October
10. At that date the blocks were structurally complete but there was no
partitioning on any floor; central-heating and air-conditioning plants were
installed or being installed, but wiring and points for the electricity supply
were incomplete. There were no Post Office telephone cables connected to the
blocks and an office telephone system could take up to nine months to install
after it had been ordered. On appeal by the rating authority the Court of
Appeal held, in dismissing the appeals, that the test as to when a building was
completed was in the context of rating when it was ready for occupation for the
purposes of the particular hereditament and not when it was structurally
complete, and as the buildings in question were not at the date in the notices
capable of occupation as offices, the completion notices have rightly been
quashed.
In the course
of his judgment Bridge LJ said at p478D:
Bearing in
mind that under the law as it stood for centuries before unoccupied property
became capable of rating, occupation was always the test of liability, I should
if I were construing this provision (paragraph 8 of Schedule 1) without having
regard to its wider context say without hesitation that what was contemplated
was that the building should be completed so as to be capable of occupation for
the appropriate purpose of the particular hereditament; that is as a house,
shop, office, etc. If the building lacks features which before it can be
occupied will have to be provided and when provided will form part of the
occupied hereditament for the basis of the valuation of that hereditament, then
I would take the view, unless constrained to the contrary, that that building
was not within the meaning of the relevant provision a completed building.
Mr Fay seeks
to derive support for that passage; indeed, it is that particular passage which
Mr Fay cited before Woolf J which appears to have led Woolf J to his decision
in favour of the ratepayer, for having cited in his judgment that particular
passage, the learned judge said:
What Bridge
LJ was looking at was the ability of the premises to be occupied for the
purposes specified in the valuation list. In this case the purpose specified in
the valuation list was as offices and in relation to those hereditaments where
there was no longer any planning permission on the expiry of the last of the
limited planning permissions, the situation was one where the owner was
prohibited by law from occupying the premises for the purpose described in the
valuation list. As the rating of the unoccupied premises would be on the basis
of their use for offices where that use is prohibited by law, and I so regard
it where there is no planning permission, it appears to me to be in accord with
the proper interpretation of paragraph 2(a) to regard the exception from
unoccupied rating provided by paragraph 2(a) as being applicable.
He continued:
For the
position to be otherwise would involve in this case an owner being liable for
rates at a higher percentage than would be applicable for the only purposes for
which he could use the premises lawfully.
Mr Fay, of
course, relies on what he calls the ‘fairness point’, that is to say that it
would be unfair for the occupier to be liable for rates at a higher percentage
than would be applicable to the permitted use in planning terms for residential
purposes. Upon the question of prohibition Mr Fay cited the decision of Attorney-General
v Smith [1958] 2 QB 173, and in particular the judgment of Lord Goddard
CJ at pp 180-181. The facts of the case were entirely different, but Lord
Goddard considered the machinery of the Town and Country Planning Act 1947 and
in relation to section 12(1) he said:
Section 12(1)
provides that ‘Subject to the provisions of this section and to the following
provisions of this Act, permission shall be required under this Part of this
Act in respect of any development of land which is carried out after the
appointed day’.
Lord Goddard
continued:
The sense of
that section is obvious: it is that development of land carried out without
permission is unlawful — it is contrary to the Act.
Mr Fay
therefore submits that the learned judge was correct in his interpretation of
the situation in this particular case.
For the
purposes of this judgment we are prepared to accept, in the light of the case
of Attorney-General v Smith, that the ratepayers were prohibited
by law from occupying the relevant hereditaments as offices; furthermore, that
the terms of the planning permission of July 13 1978 constituted action taken
by or on behalf of the local authority with a view to prohibiting the
occupation of the hereditaments referred to therein as offices. The vital
question for consideration is what is meant by the term ‘the hereditament’ in
para 2(a) and (b) of the Schedule. As the learned judge recognised, Schedule 1
was designed to make those who left premises unoccupied liable for rates. In
this case it has never been suggested that at any material time there had been
any question of structural alteration of any of the hereditaments. The appeal
in point of fact is concerned with a situation where a change of use is
contemplated by the planning decisions.
Schedule 1 is
expressed to apply to any ‘relevant hereditament’. The term ‘relevant
hereditament’ is defined in para 15 of the Schedule. I quote:
‘relevant
hereditament’ means any hereditament consisting of, or 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 our
judgment it does not detract from the definition of ‘hereditament’ in section
115 of the General Rate Act where it is defined as:
‘hereditament’
means any property which is or may become liable to a rate, being a unit of
such property which is, or would fall to be, shown as a separate item in the
valuation list.
In our
judgment the term ‘hereditament’ in para 2 of Schedule 1 is to be interpreted
as a unit of property. In subpara (c) of para 2 a further exception to the
application of para 1 is expressed to apply where:
the
hereditament is the subject of a building preservation notice as defined by
section 58 of the Town and Country Planning Act 1971 or is included in a list
compiled or approved under section 54 of that Act or is notified to the rating
authority by the Minister as a building of architectural or historic interest.*
*Editor’s
Note: The wording of para 2(c) of Sched 1 to the 1967 Act is printed as amended
by the Town and Country Planning Act 1971, Sched 23.
In subpara (d)
the exception is expressed to apply where:
the
hereditament is the subject of a preservation order or an interim preservation
notice under the Ancient Monuments Acts 1913 to 1953 or is included in a list
published by the Minister of Public Building and Works under those Acts.
It appears to
us that in those two subparagraphs the hereditament is to be identified as a
physical building which is the subject of the particular orders referred to. In
our judgment the learned judge erred in his approach where he said: ‘I identify
a close relationship
valuation list.’ Furthermore, we think that he was in error in applying to this
case the passage cited above from the judgment of Bridge LJ in Ravenseft
Properties. The learned judge in that case was considering a wholly
different provision of the Schedule. The purpose of the description in the
valuation list is to provide the basis for valuation. The description of the
use of the hereditament in the valuation list does not in our judgment control
or limit the identity of the hereditament. As to the consequence noted by the
learned judge that an owner might become liable to rates at a higher percentage
than would be applicable for the only purpose for which he could use the
premises lawfully, it has to be noted that it is open to an occupier to propose
an alteration to the valuation list. In the present case it would appear to us
to have been open to the ratepayer to have sought an alteration in the
valuation list in respect of the changed use permitted for their hereditaments.
In our judgment, the planning decisions of the local authority did not have the
effect of prohibiting the occupation of any of these hereditaments by the
ratepayers. Their effect was merely to restrict the use which they might make
of the particular hereditaments and accordingly the magistrate was correct in
finding as he did that the exceptions under para 2(a) and (b) of Schedule 1 to
the General Rate Act did not apply in the present cases. We would therefore
allow the appeal and answer the question stated by the magistrate for the
opinion of the High Court by the word ‘no’.
The appeal
was allowed with costs in the Court of Appeal and below. The order made by
Woolf J was set aside and the magistrate’s order restored. Leave to appeal to
the House of Lords was refused.