Coventry and Solihull Waste Disposal Company Ltd v Russell

JurisdictionUK Non-devolved
JudgeLORD STEYN,LORD COOKE OF THORNDON,LORD HOPE OF CRAIGHEAD,LORD CLYDE,LORD MILLETT
Judgment Date25 November 1999
Judgment citation (vLex)[1999] UKHL J1125-1
Date25 November 1999
CourtHouse of Lords
Coventry and Solihull Waste Disposal Company Limited
(Appellants)
and
Russell
(Valuation Officer) (Respondents)

[1999] UKHL J1125-1

Lord Steyn

Lord Cooke of Thorndon

Lord Hope of Craighead

Lord Clyde

Lord Millett

HOUSE OF LORDS

LORD STEYN

My Lords,

1

I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hope of Craighead. For the reasons he has given I would dismiss the appeal.

LORD COOKE OF THORNDON

My Lords,

2

I have had the advantage of reading in draft the speeches prepared by my noble and learned friends Lord Hope of Craighead and Lord Clyde. For the reasons given by them I, too, would dismiss this appeal.

LORD HOPE OF CRAIGHEAD

My Lords,

3

This appeal is concerned with an entry in the non-domestic rating list relating to a hereditament at Bar Road, Coventry which is known as the Coventry Waste Reduction Unit. The appellant, Coventry and Solihull Waste Disposal Company Limited, is the owner and operator of the hereditament. The respondent, Anthony Russell, is the Valuation Officer for the Coventry City Council area.

4

On 1 April 1990 the respondent made two entries in the rating list relating to the appellant's premises. The first, which was listed as Assessment No. 13007, was in respect of subjects described as "Refuse Destructor and Premises", the rateable value of which was £610,000. The second, which was listed as Assessment No. 15215, was in respect of subjects described as "Pipeline and Appurtenances", the rateable value of which was £38,500. On 29 November 1993 the respondent issued a notice that Assessment No. 13007 had been altered with effect from 26 February 1993 so as to reflect structural alterations to the hereditament by increasing the rateable value to £1,150,000. The appellant appealed to the Coventry and Solihull Valuation Tribunal on the grounds that the two assessments should be merged into one, and that the combined rateable value of the hereditament should be reduced by applying to it the formula for the determination of rateable value which had been prescribed by the Electricity Generators (Rateable Values) Order 1989 (S.I. 1989 No. 2474) as amended.

5

The Valuation Tribunal held that the two assessments should not be merged and that the rateable value of the pipeline should not be altered. A small reduction was made to the rateable value for Assessment No. 13007 by adjusting the respondent's valuation of the hereditament, which had been based upon the contractor's method of valuation. The appellant appealed from that decision to the Lands Tribunal. The appeal was held by the President, H.H. Judge Bernard Marder Q.C. He allowed the appeal and ordered that the two entries in the rating list should be deleted and that there should be substituted a single entry which described the hereditament as comprising the refuse destructor, the power generation plant and the pipeline with appurtenant premises. He ascribed a rateable value of £143,034 with effect from 26 February 1993 to the hereditament which he determined on the basis of the formula.

6

The respondent then appealed to the Court of Appeal by way of case stated under section 3(4) of the Lands Tribunal Act 1949. Two issues were before the Court in that appeal. The first was whether the two assessments should be merged into a single assessment. The second was whether the hereditament, whether it comprised the plant and the pipeline or just the plant, should be valued in accordance with the 1989 Regulations on the basis of the formula. The respondent's appeal on the first issue was dismissed. All three members of the Court of Appeal (Robert Walker L.J., Waller L.J. and Hobhouse L.J. (now Lord Hobhouse of Woodborough)) held that the pipeline formed part of a single hereditament comprising the incinerator plant, the generator plant and the pipeline and that the two assessments should be merged into a single assessment. But by a majority (Robert Walker L.J. dissenting) the Court of Appeal allowed the respondent's appeal on the second issue on the ground that the 1989 Regulations did not apply to the hereditament. The parties were agreed that on this basis the rateable value of the hereditament was £928,500. The respondent has not appealed against the decision of the Court of Appeal on the first issue. The appellant has appealed against its decision on the second issue, as to whether or not the hereditament fell to be valued under the 1989 Regulations in accordance with the formula. It is the second issue only which is before your Lordships in this appeal.

7

The hereditament

8

The Coventry Waste Reduction Unit was built for Coventry City Council in the early 1970s. It came into operation in 1975. It was designed to receive waste from householders and commercial and industrial undertakings collected by the local authority's refuse collection services. It was also designed to take in waste which people brought in their own vehicles to a civic amenity centre on the premises. The waste was to be incinerated, leaving a residue of ash and ferrous material which could be more readily disposed of. An integral part of the original design was a heat transfer station and pipeline. They were completed in 1976. The purpose of this facility was to transfer heat in the form of hot water produced by steam from the boilers from the energy raised by the incineration process to nearby works now occupied by the car manufacturer Peugeot. Subsequent refinements were incorporated into the premises to enable various material such as glass and metals to be received separately for re-cycling. On the coming into force of the Environmental Protection Act 1990 local authorities were required to discontinue from operating their own waste disposal facilities, and waste disposal contracts had to be awarded on the basis of competitive tendering. The appellant company was formed in 1992 for the purpose of operating the waste disposal facilities previously operated by Coventry City Council and Solihull Metropolitan Borough Council. On 1 April 1994 in accordance with a transfer scheme made under Schedule 2 to the Act of 1990 the plant and the pipeline were transferred to and vested in the company.

9

The subject matter of this appeal arises out of substantial alterations to the premises which were carried out in 1992 and 1993 before they were vested in the company. Approximately £8.5m was invested in the construction of an electricity generating plant and associated equipment. In consequence of these alterations, which became operational on 26 February 1993, electricity is generated by using steam from the boilers of the incinerator plant to drive a turbine. Some of the electricity is used on the premises, but most of it is sold though the Non Fossil Purchasing Agency and supplied to the distribution network of East Midlands Electricity Plc. The plant generates 12.9 Mw of electricity, of which 11.4 Mw is exported through the distribution network. For the purposes of the 1989 Order, 11.4 Kw is the plant's declared net capacity. The plant continues to use the steam from the boilers to supply heat to the works occupied by Peugeot. The Lands Tribunal held that the plant was originally constructed to dispose of Coventry's waste by incineration and that, although the operations of the plant had been expanded so as to enable electricity to be generated, the disposal of Coventry's refuse together with that of Solihull remains the principal reason for its existence. This finding has not been disputed by either party to the appeal.

10

The 1989 Order

11

The Local Government Finance Act 1988, under which the 1989 Order was made, brought about major changes in the system of finance for local government in England and Wales. It has three main elements: a system of taxation of individuals to be known as the Community Charge, rates on non-domestic property and a revenue support grant. Part III of the Act deals with non-domestic rating. Section 41(1) provides that the valuation officer for a charging authority shall compile, and then maintain, lists for the authority, to be called its non-domestic rating lists, in accordance with that Part of the Act. Section 56(1) gives effect to Schedule 6 to the Act, which provides for the determination of the rateable value of non-domestic hereditaments.

12

The primary rule is that which is set out in paragraph 2(1) of the Schedule. It provides that the rateable value of a non-domestic hereditament shall be taken to be an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year if the tenant undertook to pay all usual tenant's rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command that rent. The traditional methods of valuation - the comparative method, the revenue method and the contractor's method - remain available to the valuer in order that he may determine the annual value of the hereditament. Provision is made in paragraph 2(4) for maintaining a uniform level of valuation for subsequent entries with that when the list was compiled by requiring, as a general rule, that the day by reference to which the determination is to be made is the day on which the list came into force. The respondent's assessment of the rateable value of the premises with effect from 26 February 1993, when the alterations to the plant became operational, was made by applying these rules. He used the contractor's method in order to determine the rateable value of the hereditament under paragraph 2(1).

13

The starting point for the appellant's argument is to be found in paragraph 3(1) of Schedule 6. This paragraph provides that the Secretary of State may by order provide that in the case of a non-domestic of such description as may...

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