Cardtronics Europe Ltd v Chris Sykes and Others (Valuation Officers)
| Jurisdiction | England & Wales |
| Judge | Lady Justice King,Lady Justice Gloster,Lord Justice Lindblom |
| Judgment Date | 09 November 2018 |
| Neutral Citation | [2018] EWCA Civ 2472 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case Nos: C3/2017/1590, C3/2017/1713, C3/2017/1714, C3/2017/1716, C3/2017/1717 and C3/2017/1780 |
| Date | 09 November 2018 |
[2018] EWCA Civ 2472
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
MR MARTIN RODGER Q.C. AND MR A.J. TROTT F.R.I.C.S.
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Gloster, Vice President of the Court of Appeal, Civil Division
Lady Justice King
and
Lord Justice Lindblom
Case Nos: C3/2017/1590, C3/2017/1713, C3/2017/1714, C3/2017/1716, C3/2017/1717 and C3/2017/1780
Mr Daniel Kolinsky Q.C. and Mr Luke Wilcox (instructed by DMH Stallard LLP) for the First Appellant
Mr Timothy Mould Q.C. and Mr Guy Williams (instructed by Berwin Leighton Paisner LLP) for the Second Appellant
Mr Richard Drabble Q.C. and Mr Christopher Lewsley (instructed by Dentons UKMEA LLP) for the Third Appellant
Mr Timothy Mould Q.C. and Mr Christopher Lewsley (instructed by Dentons UKMEA LLP) for the Fourth Appellant
Mr Timothy Morshead Q.C. and Ms Galina Ward (instructed by HMRC Solicitor's Office and Legal Services) for the Respondents
Mr Timothy Morshead Q.C. and Ms Galina Ward (instructed by HMRC Solicitor's Office and Legal Services) for the Appellants
Mr Timothy Mould Q.C. and Mr Guy Williams (instructed by Berwin Leighton Paisner LLP) for the Respondents
Hearing dates: 23 and 24 May 2018
Judgment Approved by the court for handing down (subject to editorial corrections)
Introduction
What is the correct approach in law to the rating of the site of an automated teller machine (“ATM”) in a supermarket, shop, or petrol filling station? That is the basic question in these appeals. In 2015 there were about 70,000 ATM's in the United Kingdom, most of them in bank premises. But many are in supermarkets and other shops, where the operator of the ATM and the occupier of the premises are not the same company. How should the sites of these ATM's be rated? Are they capable in law of being separate hereditaments? And if so, are they in the rateable occupation of the banks that own the ATM's?
The appeals are against the decision of the Upper Tribunal (Lands Chamber) (Mr Martin Rodger Q.C., Deputy Chamber President, and Mr A.J. Trott F.R.I.C.S.) (“the Tribunal”), on 12 April 2017, allowing, in part, appeals against the decision of the Valuation Tribunal for England (“the VTE”), on 4 March 2016, to refuse to alter the 2010 rating list by deleting amendments made by Valuation Officers to create separate entries for the sites of ATM's. The sites are in supermarkets owned by Sainsbury's Supermarkets Ltd. (“Sainsbury”), by Tesco Stores Ltd. (“Tesco”) and by The Co-operative Group Ltd. (“the Co-op”), and in premises where an ATM is operated by Cardtronics Europe Ltd. (“Cardtronics”). The ATM's in the supermarkets and superstores are operated by banks within the same corporate structure as the retailer. Cardtronics operates more than 16,000 of its own ATM's in shops and other premises.
Each of the disputed alterations to the rating list had the effect of including the site of the ATM as a separate hereditament with its own rateable value, but – in most cases – without any corresponding reduction in the rateable value of the shop or other premises in which it was located. Each site was the subject of an appeal to the VTE. Of those appeals, 11 were selected as lead cases. All 11 were dismissed by the VTE, which concluded, in each case, that the sites of the ATM's were separate hereditaments in rateable occupation by the bank or other ATM provider, not the owner of the host premises, and that the site in question should therefore remain the subject of a separate entry in the rating list. Nine of those 11 cases went on appeal to the Tribunal; the other two were stayed. The Tribunal allowed Tesco's appeals for ATM sites inside its superstores in Nottingham, Walsall and Rugby, but dismissed the others. It subsequently granted each party permission to appeal to this court.
The main issues in the appeals
The parties' grounds of appeal raise a number of common issues, two of which are central:
(1) Did the Tribunal err in its approach to the identification of a hereditament?
(2) Did the Tribunal err in its approach to the rateable occupation of the ATM sites?
The ATM sites considered by the Tribunal
The Tribunal provided (in paragraphs 21 to 75 of its decision) a very full and clear account of the relevant facts – including the relevant practical and contractual arrangements – which need not be repeated here.
The ATM in Sainsbury's supermarket in Worcester is in an external wall, next to the main entrance door, and can be used 24 hours a day. It sits on a metal plinth, is chained to the floor of the cash room in the store, and is connected to the supermarket's electricity supply. Sainsbury's supermarket in Stroud has two ATM's sited next to each other in an external wall, within a secure cash room beside the main entrance door. Sainsbury is the leasehold owner of each of these stores, and is entitled to exclusive possession of all the floor space in them. There is no lease to Sainsbury's Bank Plc. Under an agreement entered into between Sainsbury and the bank in February 2007 – known as the “Squadron” agreement – the bank was granted the right to install and operate the ATM's, “to be enjoyed in common with” Sainsbury. The bank has a licence to enter each ATM site. Responsibility for the day-to-day operation and management of the ATM's lies with Sainsbury. The cash dispensed by the ATM's is owned by the bank, but is kept in the security room of the store, under the control of Sainsbury's staff, and at Sainsbury's risk. Maintenance is carried out daily by Sainsbury's staff, during the opening hours of the store.
Tesco's superstore in Walsall has two internal ATM's. Its superstore in Nottingham has two ATM's in external walls, and one internal ATM. Its supermarket in Rugby has one internal ATM. The ATM's in those stores were installed under an ATM site licence entered into between Tesco and Tesco Personal Finance Plc on 29 November 2002. The licence conferred mutual obligations and benefits on the two parties for the installation and operation of the ATM's. Tesco Personal Finance Plc has the exclusive right to install and operate ATM's in Tesco's stores. It is obliged to deliver agreed levels of service, which require the ATM's to be operational at specified times.
The Co-op's supermarket in Newcastle-under-Lyme has an ATM in an external wall. In Huddersfield, it has a shop at a petrol filling station, with an ATM in an external wall. Its supermarket in Keighley has an ATM in an external wall. Under a licence agreement dated 1 January 2008, The Co-operative Bank Plc was permitted to install and operate ATM's on the sites created for that purpose by the Co-op, as owner and operator of the stores. The ATM's were maintained, and the cash in them replenished, under separate agreements between the bank and third parties. The ATM's themselves and the cash in them are owned by the bank, but the ATM's are maintained and operated by the Co-op's staff. Electrical power is provided to them from the stores. The bank has access to them only during the stores' opening hours.
Cardtronics operates an ATM in a Londis “convenience store” in Harefield, with about 60 square metres of floor space. The ATM is in an external wall, next to the entrance door. The ATM was placed in the store under a licence agreement with Londis, dated 26 March 2007, which makes provision for Cardtronics to gain access to it. It is owned, operated, maintained and loaded by Cardtronics. Maintenance and loading are undertaken within the store. Loading blocks an aisle, and the store is sometimes closed while it is being carried out.
The concept of a hereditament
Non-domestic rates are a tax on individual units of property, known in England as hereditaments. Where a hereditament is wholly or partly occupied, rates are payable by the party who is in rateable occupation. While a hereditament may be occupied by more than one party, only one occupier may be in rateable occupation. Under section 42 of the Local Government Finance Act 1988 the rating list must show every relevant non-domestic hereditament. Under section 64(4)(a), a hereditament is a relevant hereditament if it consists of “lands”. Section 64(1) defines a “hereditament” as “anything which, by virtue of the definition of hereditament in section 115(1) of [the General Rate Act 1967], would have been a hereditament for the purposes of that Act had this Act not been passed”. The relevant definition in section 115(1) of the 1967 Act is “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”.
Whether a unit of property is capable of being a hereditament is determined by applying principles developed by the courts in a long series of cases. In Woolway (Valuation Officer) v Mazars LLP [2015] A.C. 1862, [2015] UKSC 53, the Supreme Court confirmed that the primary test of whether distinct spaces in common occupation were to be assessed for rates as a single hereditament was a “geographical” test – which, said Lord Sumption (in paragraph 6 of his judgment), “depends simply on whether the premises said to constitute a hereditament constitute a single unit on a plan”. He referred (in paragraph 11) to the Scottish rating decision in Burn Stewart Distillers Plc v Lanarkshire Valuation Joint Board [2001] R.A. 110, where it was emphasized by the...
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