Hoare and Another v National Trust
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SCHIEMANN,LORD JUSTICE PETER GIBSON,THE VICE-CHANCELLOR |
| Judgment Date | 13 October 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J1013-4 |
| Docket Number | No FC3 98/6486/3 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 October 1998 |
[1998] EWCA Civ J1013-4
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF THE LANDS TRIBUNAL
Royal Courts of Justice
Strand
London WC2
The Vice-Chancellor
Lord Justice Peter Gibson
Lord Justice Schiemann
No FC3 98/6486/3
LATRF 97/1384/3
MR A ANDERSON QC and MR A PARR (Instructed by Nabarro Nathanson of London) appeared on behalf of the Appellant ( MR A ALESBURY appeared on 13th October 1998)
MR D HOLGATE QC (Instructed by Andrew Gunz, Inland Revenue, Solicitors Office, London WC2) appeared on behalf of the Respondents
This appeal from the Lands Tribunal concerns the rating of Petworth House and Castle Drogo owned by the National Trust. It raises once more a problem which has vexed the law of rating for over a hundred years. It concerns the method of ascribing a rateable value to properties for which no tenant could be found in the real world and which can not generate sufficient income to cover their maintenance costs. The case law indicates that while the existence of such a state of affairs may lead the Valuation Officer to come to the conclusion that the rateable value of the hereditament is nil it does not force him to do so. Each of these properties is owned by the National Trust. The Lands Tribunal ascribed a positive rateable value to each of them. The National Trust appeals.
For the purposes of the law of rating a rateable value has to be ascribed to properties. For present purposes the matter is governed by paragraph 2(1) of Schedule 6 to the Local Government Finance Act 1988:
"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 tenants' rates and taxes and to bear the costs of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command that rent."
This formula is commonly referred to as the rating hypothesis. The landlord, the tenant and the rent payable under this rating hypothesis I shall refer to respectively as the hypothetical landlord, the hypothetical tenant and the hypothetical rent.
There is a number of methods of arriving at rateable values. Usually it is possible to arrive at a hypothetical rent by discovering what rents are being paid for similar properties and making any necessary adjustments. That was not possible here because there was no rental market in similar properties. Sometimes one can make use of assessments for rates for comparable properties. That was not of much use in the present case. Sometimes one can value by reference to the capital value of the property on what is known as the Contractor's basis.
"The Contractor's basis of valuation proceeds on the hypothesis that the prospective tenant has a choice between renting the actual hereditament and constructing similar premises elsewhere of which he would be the owner. The question which the contractor's basis seeks to answer is how the prospective tenant would assess the annual equivalent of the capital cost of construction and ownership as compared with the alternative available to him of renting the hereditament on the statutory terms: Ryde on Rating and the Council Tax—Paragraph E 540."
Liverpool Corporation v Chorley Assessment Committee and Withnell Overseers (1912) 1KB 270–293.
That was not regarded as appropriate by anyone in the present case.
Sometimes in the case of properties which are rarely if ever let it is appropriate to arrive at the annual value by a method of valuation known as the profits basis. This is a somewhat confusing name since profits as such are not rated and are not rateable. But the broad theory is that where a property can be used so as to yield profits then the hypothetical tenants would be prepared to pay a rent for the use of that property in order to be able to make those profits and that the level of rent would reflect the level of anticipated profits. The National Trust in the present case produced figures designed to show that no profits could be made from these properties and that therefore no hypothetical tenant would be prepared to offer any hypothetical rent for them.
A bird's eye view of the case which does no justice to the subtlety of the arguments but which helps set the scene reveals the following. The Tribunal broadly accepted that no profit could be made from these properties but held that an "overbid" would be made by the National Trust, who could be treated as a hypothetical tenant, to reflect the great historical and cultural value of these houses notwithstanding that there was no money to be made out of being a tenant of them. The Tribunal calculated the amount of hypothetical rent by taking 3% of the gross receipts of each property. Before us Mr Anderson Q.C. who appears for the Trust takes two broad points: the Tribunal should not have regarded this as an overbid case at all and in any event there was no basis for taking 3% of the gross receipts as a method of arriving at the overbid. Mr Holgate Q.C. who appears for the valuation officers submits that these are difficult valuation questions, that the Tribunal has great valuation expertise and this court should not interfere.
The findings of the Tribunal can be summarised as follows:-The findings of the Tribunal can be summarised as follows:—
1. each of these properties was of national heritage importance,
2. each had an "annual deficit of expenditure over income",
3. the Trust had a motive for becoming a tenant of each of these properties, notwithstanding that the cost of repair and administration would make them unprofitable,
4. the Trust had, from other sources, sufficient monies to enable it to pay a rent ( referred to by the Tribunal as an overbid) over and above that which can be found by using the full profits basis of valuation,
5. what overbid the Trust would make was a matter of fact to be determined by the Tribunal,
6. no-one other than the Trust would make an overbid,
7. it would be both difficult and arbitrary to adjust a full profits valuation in order to arrive at the amount of any overbid, and
8. the appropriate method of arriving at the overbid was to take 3% of the gross receipts of each property.
The basis upon which the Tribunal proceeded appears from the following citation:—
"While we accept that we can find that Petworth and Castle Drogo have nil rateable values, we would be reluctant to make that decision in the absence of compelling evidence leading inescapably to that conclusion. We have three reasons for this view. First, as a matter of common sense, a hereditament which is in rateable occupation, and is of some value or benefit to the occupier, must normally have a rental value, which can only be reduced to nil in exceptional circumstances. …………………. The second reason why we would be reluctant to find nil rateable values for the appeal hereditaments is that it does not automatically follow that lack of profitability produces a nil assessment. ……………………. Our third reason is that a nil assessment is, in effect, an exemption from rates, which is a matter for Parliament."
I accept each of the three premises there set out by the Tribunal but they do not in my judgment lead to the conclusion which the Tribunal drew from them, namely, that it should be reluctant to decide that the two subject properties had a nil rateable value. As to the first, on any basis the present cases are exceptional when compared to most of the hereditaments which need to be valued—in each case their owner paid huge sums in cash or kind to the National Trust in order to be shot of them. That differentiates them from the overwhelming majority of properties whose rateable value has to be decided. As to the second and third, once one accepts (as the Tribunal rightly accepted) that it sometimes follows from lack of profitability that there should be a nil assessment, then one must take it that Parliament has sanctioned that state of affairs in some cases. The challenge before the Tribunal was to find one or more tests capable of differentiating those cases where lack of profitability leads to a nil assessment from those where it does not. The three premises do not help to provide such a test.
THE CASE LAW BACKGROUNDTHE CASE LAW BACKGROUND
Each party cited in front of us a number of cases in support of their submissions and the Tribunal relied on some of them. The cases set the legal background against which the Tribunal came to its decision. The starting point is the rating hypothesis. As to this Lord Justice Scott in Robinson Brothers (Brewers) Ltd v Houghton and Chester le Street Assessment Committee (1937) 2KB 445 said the following:
"The rent to be ascertained is the figure at which the hypothetical landlord and tenant would, in the opinion of the valuer or the Tribunal, come to terms as a result of bargaining for that hereditament, in the light of competition or its absence in both demand and supply, as a result of "the higgling of the market". p.470.
"Whilst the tenant is hypothetical and the landlord who is to let to the tenant is necessarily also hypothetical, the hereditament is actual—namely, the hereditament described in the valuation list with all its actualities. Two consequences follow. All the intrinsic advantages and disadvantages must be considered and weighed. It is just that particular hereditament which is supposed to be in the market with all its attractions for would-be tenants, to whatever kind of human emotion or interest or sense of duty they may...
To continue reading
Request your trial
-
Telereal Trillium v Kevin Hewitt (Valuation Officer)
...the Poor of the Parish of Erith in the County of Kent [1893] AC 562 (the “ Erith case”); the former more specifically from Hoare (Valuation Officer) v National Trust [1998] RA 391, 422 per Sir Richard Scott 17 The core of the tribunal's reasoning comes in the following paragraphs: “102. Ha......
-
Decision Nº LCA 129 2013. Upper Tribunal (Lands Chamber), 04-12-2014
...[2010] UKUT 364 Bwllfa and Merthyr Dare Steam Collieries 1891 Ltd v Pontypridd Waterworks Co [1903] AC 426 Hoare v National Trust (1999) 77 P&CR 366 R v Caradon District Council (2000) 80 P&CR 154 Ryde International Plc v London Regional Transport [2004] EWCA Civ 232 Secretary of State v Io......
-
Railtrack Plc ((in Administration)) v Guinness Ltd
...should be kept as near as possible to reality". He refers also to the statement to similar effect by Peter Gibson LJ in Hoare (VO) v National Trust [1998] RA 391, 415, where he applied the approach of Lawton LJ in a rating context, and emphasised "the necessity to adhere to reality subject ......
-
William Young v Commissioner of Valuation
...2 App Cas 743 Dawkins v Ash Brothers Limited [1969] 2AC 366 Post Office v Nottingham Council [1976] WLR 624 Hoare v National Trust [1999] 1EGLR 155 R (on the application of Westminster City Council) v National Asylum Support Service [2002] UKHL 38 Assessor for Grampian Valuation B......