Iceland Foods Ltd v Jane a Berry (valuation Officer)
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos,Lady Justice Gloster,Lady Justice Sharp |
| Judgment Date | 23 November 2016 |
| Neutral Citation | [2016] EWCA Civ 1150 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 November 2016 |
| Docket Number | Case No: C3/2015/1126/LATRF |
[2016] EWCA Civ 1150
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
DEPUTY PRESIDENT MARTIN RODGER QC and MR McCREA FRICS
CASE No: RA/61/2012
Royal Courts of Justice
Strand, London, WC2A 2LL
THE CHANCELLOR OF THE HIGH COURT
Lady Justice Gloster
and
Lady Justice Sharp
Case No: C3/2015/1126/LATRF
Mr Daniel Kolinsky QC and Mr Luke Wilcox (instructed by TLT LLP) for Iceland Foods Limited
Mr Tim Morshead QC and Mr Zack Simons (instructed by HMRC Solicitor) for the Valuation Officer
Hearing dates: 9 th and 10 th November 2016
Approved Judgment
Sir Geoffrey Vos, Chancellor of the High Court:
The central issue in this appeal can be shortly stated. It is whether the air handling system used by Iceland Foods Limited ("Iceland") in its retail store at 4 Penketh Drive, Liverpool (the "premises") is plant or machinery "used or intended to be used in connection with services mainly or exclusively as part of manufacturing operations or trade processes" within the meaning of the Valuation for Rating (Plant and Machinery) (England) Regulations 2000 (the "2000 Regulations"). The Valuation Tribunal for England ("VTE") decided on 18 th October 2012 that it was, but the Upper Tribunal (Lands Chamber) reversed that decision on 14 th January 2015 concluding that it was not. Iceland now appeal to this court contending, in essence, that its air handling system is plant used "in connection with services mainly or exclusively as part of [its] trade processes". If Iceland is right, the air handling system would be ignored in calculating the rateable value of the premises. If the respondent Valuation Officer, Ms Jane Berry (the "VO") is right, a value would be attributed to the air handling system thereby increasing the rateable value of the premises.
It is common ground that the appeal to the Upper Tribunal was an appeal under regulation 42 of the Valuation Tribunal for England (Council Tax and Rating Appeals) (Procedure) Regulations 2009 (SI 2269/2009). By regulation 42(5) the Upper Tribunal had the power to confirm, vary, set aside, revoke or remit the VTE's order. In fact, the Upper Tribunal allowed the appeal in part and made new findings of fact, which are not challenged before us. It is, therefore, not necessary for us to consider the detail of the VTE's decision. The Upper Tribunal determined that the premises were to be entered in the local non-domestic rating list with a rateable value of £104,000 with effect from 1 st April 2010. The VTE had ordered the VO to reduce the assessment of the premises from a rateable value of £108,000 to a rateable value of £98,000 with effect from 1 st April 2010.
The figures are not, however, in issue before us. All we have to decide is the question of the proper construction of the 2000 Regulations. Before dealing with that question, however, I shall need to set out the factual background, which I am able to take directly from the decision of the Upper Tribunal as follows:-
"8. Iceland is a well-known supermarket operator specialising in the sale of refrigerated foods, both frozen and chilled, and, to a lesser extent, in the sale of general groceries. It operates from more than 800 stores in the UK and Ireland of which the appeal property is typical.
9. The [premises are] a small retail warehouse which forms part of a larger retail development known as the Speke Centre, comprising a mix of retail warehousing, smaller shops and a large Morrisons superstore, all surrounding a shared central car park. At the rear of the appeal property is a secure service yard which it shares with adjacent units.
10. The [premises have] a ground floor sales area of 449. 25m2 with a single public entrance at the front, and a further 134. 62m2 of ancillary accommodation arranged on one side at the rear which provides staff rooms, a small office and goods-in and storage areas …
11. Iceland took occupation of the [premises] in May 2007 under a 10-year lease on full repairing and insuring terms at an annual rent of £109,216. The appeal property was let in a shell condition and as part of its fitting out works Iceland installed an air handling system designed with its own style of trading in mind.
12. The air handling system provides a ventilating, heating and cooling service to the [premises], and comprises three main elements. A large air handling unit with a mechanical cooling capacity of approximately 85 kW is located outside and to the rear of the building; this unit serves a network of ducts by which warm or cold air is supplied to and extracted from the retail area through an array of ceiling mounted diffusers and grilles. On our inspection we were able to observe the air handling unit and to contrast it with the very much smaller units on the rear walls of adjoining stores — one of which is considerably larger than the [premises]. Iceland's equipment occupies its own fenced compound and in size and shape resembles a very large refuse skip (4.5 metres by 2.35 metres in area) from which rise two vertical supply and return air ducts, each a metre square, which enter the rear wall of the building 4 metres above the ground. A separate but linked mechanical extract system is located at the rear of the retail area, furthest from the entrance, to deal with the removal of excess heat in that area. Finally, the whole system is controlled by means of a computerised control unit located adjacent to the air handling unit. …
14. The opening hours of the store vary from day to day but in a typical week the store trades for 67.5 hours over 7 days. Staff will usually be present for a further two hours a day outside opening hours for cleaning, loading cabinets and other tasks. In total, therefore, customers or staff will typically be present in the store for a little under half of the total hours in a week.
15. Although Iceland stocks a modest selection of general or "ambient" groceries, its business is mainly focused on the sale of refrigerated products which represent roughly 80% of its sales by value, divided evenly between chilled and frozen lines.
16. Frozen and chilled products are stored and displayed in refrigerated cabinets arranged around the perimeter of the sales floor and in four aisles running from front to rear. The total number of these refrigerated cabinets has fluctuated between 79 and 84 since the store opened in 2007. As at 1 April 2010 there were 82 cabinets comprising 71 glass topped "integral" freezer cabinets, 3 open topped "integral" freezer cabinets, 7 open-fronted multi-deck "integral" chiller cabinets and one "remote" roll-in milk chiller.
17. All of the equipment in use at the [premises] on the material day was classified as "climate class 3" under the main British and European test standard used for testing retail display cabinets. This classification indicates that the cabinets are designed to operate at a surrounding air temperature of up to 25° C. …
18. The description of some refrigerated display cabinets as "integral" and others as "remote" is of significance. The object of any refrigerator is to maintain the internal temperature (and thus that of the goods stored in it) at the desired level by absorbing heat from within the cabinet and expelling it outside the cabinet by means of a condenser. Integral cabinets achieve this using refrigeration equipment and condensers installed within the body of the cabinet itself, and by expelling heat to the environment immediately surrounding the cabinet. Remote cabinets, in contrast, employ refrigeration equipment at a distance from the cabinets; heat is absorbed by a liquid refrigerant which is conveyed to the cabinet through pipes permanently installed in the store and is expelled remotely through condensers located outside the building.
19. The advantages of integral over remote cabinets include flexibility, in that integral cabinets can be easily unplugged and moved around or replaced, whereas remote cabinets depend on their connection to a fixed network of pipes and centralised plant. Integral cabinets also minimise the risk of loss of stock in the event of refrigeration failure, as each cabinet is self-contained and operates independently. The disadvantage of integral cabinets is that not only do they generate heat in their own right, but the heat which they absorb from within is expelled from beneath or behind the cabinet into the surrounding space, causing the temperature of that space to rise.
20. As integral cabinets are designed to operate below a particular ambient temperature (25° C in the case of Iceland's climate class 3 cabinets) the heat generated by the cabinets themselves must be controlled to ensure that they perform as intended and do not malfunction. Where a large number of integral cabinets is present in a confined space, it is necessary to provide an air handling system with a correspondingly large cooling capacity. If the design parameters of the cabinets are exceeded the permitted product storage temperature within the cabinets may be breached causing a deterioration in the quality of the products stored or displayed in them.
21. Iceland values the flexibility and lower capital cost associated with integral cabinets and they represent the great majority of the refrigerated cabinets in almost all of its stores. [On the premises] only the milk-chiller operates on the "remote" principle, with pipework allowing heat to be rejected outside the building. The remaining 81 cabinets are of the integral variety and reject heat directly into the sales floor.
22. The air handling system functions at all times, day and night. It is designed and programmed to maintain the store temperature during trading hours at an acceptable level for both the functioning of the refrigerated cabinets and the comfort of staff and...
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Iceland Foods Ltd v Berry (Valuation Officer)
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