Telereal Trillium v Kevin Hewitt (Valuation Officer)
| Jurisdiction | England & Wales |
| Judge | The Senior President of Tribunals,Davis LJ,Lord Justice Henderson |
| Judgment Date | 19 January 2018 |
| Neutral Citation | [2018] EWCA Civ 26 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 January 2018 |
| Docket Number | Case No: C3/2016/3392 |
[2018] EWCA Civ 26
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
[2016] UKUT 258 (LC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Davis
THE SENIOR PRESIDENT OF TRIBUNALS
and
Lord Justice Henderson
Case No: C3/2016/3392
Mr Richard Glover QC (instructed by DLA Piper UK LLP) for the Appellant
Ms Hui Ling McCarthy (instructed by HM Revenue and Customs Solicitor's Office) for the Respondent
Hearing date: 1 st November 2017
Judgment Approved
Introduction and background
This is a rating appeal, brought by the appellant, Telereal Trillium, from the Lands Chamber of the Upper Tribunal (Judge Huskinson and Mr P D McCrea FRICS) (“the Upper Tribunal”) which by its decision released on 4 th August 2016 (“The UT Decision”) allowed the appeal of the valuation officer, Kevin Hewitt, concerning the rateable value of the subject premises, Mexford House, Mexford Avenue, Blackpool, FY2 0XN (“Mexford House”) which had been determined at a nominal figure of £1 with effect from 1 st April 2010 (“the material date”) by the Valuation Tribunal for England (“the VTE”) on 10 th November 2014.
Mexford House is a substantial three-storey block of offices in the North Shore area of Blackpool. It was purpose-built in 1971, and was occupied continuously as Government offices from 1972, in part by the Department of Work and Pensions (“the DWP”) and in part by the Commissioners for Her Majesty's Revenue and Customs (“HMRC”). By the material date, however, the property was vacant. Both HMRC (on 29 th February 2008) and the DWP (on 13th March 2008) had given notice of their intention to vacate the property, and it was formally handed back to the lessor on 31 st March 2009. It is uncertain when the process of vacating the premises was finally complete, but there is no dispute that the property was empty by 1 st April 2010, that being the date on which the 2010 non-domestic rating list for the area of Blackpool Borough Council first came into force by virtue of section 41(2) of the Local Government Finance Act 1988 (“the 1988 Act”).
Although the new rating list came into force on the material date, the rateable value of Mexford House (which comprised the relevant hereditament for rating purposes) had to be determined as at a valuation date two years earlier, on 1 st April 2008: see Article 2 of the Rating Lists (Valuation Date) (England) Order 2008 (SI 2008 No 216). This date is usually referred to as the “antecedent valuation date” or “AVD” for short. It will be noted that both HMRC and the DWP had already given notice of their intention to vacate Mexford House shortly before the AVD.
Ascertainment of the rateable value of a business (ie non-domestic) hereditament requires the application of a time-honoured hypothesis which in its essentials dates back at least to a statute of King William IV, the Rating Valuation Act of 1836. In its current version, which is contained in paragraph 2 of Schedule 6 to the 1988 Act, the hypothesis reads as follows:
“(1) The rateable value of a non-domestic hereditament none of which consists of domestic property and none of which is exempt from local non-domestic rating 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 on these three assumptions-
(a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made;
(b) the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic;
(c) the third assumption is that the tenant undertakes to pay 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 the rent mentioned above.”
The day referred to in sub-paragraph 2(1)(a) is the AVD, and so in the present case is 1 st April 2008: see paragraph 2(3).
The essential content of the rating hypothesis lies in the words “the rent at which it is estimated the hereditament might reasonably be expected to let from year to year”. These words assume a notional letting of the hereditament on a yearly tenancy, in relation to which Wills J said in one of the early leading cases ( Smith v The Churchwardens and Overseers of the Poor of the Parish of Birmingham (1888) 22 QBD 211, at 219):
“The Act of Parliament requires the assumption of a tenancy from year to year to be made, and you can no more impugn the hypothesis of such a tenancy in rating matters than in logic you are permitted to deny your opponent's hypothetical premiss. You must assume a landlord willing to let, and a tenant willing to take by the year; and having done so, you must get in the best way you can at the rent which, under an agreement brought about by the compromise of the conflicting interests of the man who wants to receive as much as he can and the man who wants to pay as little as he can, would be arrived at under such circumstances.”
I will need to return later to some of the more recent learning on the principles which the valuation officer (or, on appeal, a tribunal or court) must follow when the rating hypothesis has to be applied. At this stage, I will merely note that, by virtue of paragraph 2(5) of Schedule 6 to the 1988 Act, certain matters “shall be taken to be as they are assumed to be on the day on which the list must be compiled”, i.e. in the present context on the material date, two years after the AVD. These matters are listed in paragraph 2(7), and relevantly include:
“(a) matters affecting the physical state or physical enjoyment of the hereditament,
(b) the mode or category of occupation of the hereditament,
…
(d) matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are none the less physically manifest there, and
(e) the use or occupation of other premises situated in the locality of the hereditament.”
Against this statutory background, the rateable value entered in the 2010 list for Mexford House with effect from 1 st April 2010 was £490,000. This figure was substantially in excess of the yearly rent of £417,000 for the premises which had been payable since September 2000, including after a septennial rent review in 2007. On appeal, the VTE (Mr M Unees (chairman) and Dr M Fraenkel) by its decision dated on 24 th October 2014 reduced the rateable value to £1, after hearing valuation evidence and submissions from a valuer instructed by Telereal Trillium (Mr Stevens), and from Mr R May on behalf of the valuation officer, at a hearing on 12 th September 2014.
Mr Stevens was able to place before the panel what it found to be “good examples of valuation officers placing nominal or nil values on large dated offices which could no longer be let” (paragraph 37 of the VTE's decision). For his part, Mr May “attempted to show that there was a demand because other large offices in the area were occupied” (paragraph 32). Mr May stated that the occupier of Hesketh House in Fleetwood had agreed a large increase in rent on review in 2008, and he referred to a tribunal case where Mexford House itself had been successfully relied on by the valuation officer as a comparable occupied property. The panel, however, found these submissions unconvincing. As they explained, at paragraph 33:
“However, the panel noted that the occupiers of those other offices were mainly public sector organisations. Was there a demand for large offices to be situated [ in] Blackpool from public sector organisations or businesses at the AVD of 1 April 2008? Would they be interested in occupying the appeal property? On the evidence available, the panel was not convinced. The panel found Mr Stevens' evidence persuasive. He had shown that between 2005 and 2009, there were no new lettings for offices anywhere near the size of the appeal property in Blackpool or the wider geographical area. In addition, there had been no demand for the appeal property in over 5 years of marketing it. Mr May acknowledged that there had been no new lettings in the area for offices of that size and admitted, during questioning, that the appeal property was currently unlettable as offices.”
The VTE then stated its conclusions, in paragraph 38:
“In conclusion, the panel was satisfied that by the AVD of 1 April 2008, the actual occupier of the appeal property had decided to vacate it. The evidence from lettings in the area between 2005 and 2009 clearly showed that there was no market demand for the appeal property in its current layout as three storey offices over 6000 sq.mts. The appeal property had been on the market for more than five years which further showed that there was no demand, even on a floor by floor or wing by wing basis. As valuation officers had placed nominal values on other large offices where there was no demand, the panel decided to reduce the appeal property's assessment to a nominal value, say rateable value £1.”
From this decision, the valuation officer appealed to the Upper Tribunal. Since the VTE does not form part of the First-tier Tribunal established by the Tribunals, Courts and Enforcement Act 2007, we enquired about the source and nature of the right of appeal thus exercised. In a helpful joint note supplied to us on the day after the hearing in this court, counsel referred us to regulation 42 of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 (“the NDR Regulations”), which provides that:
“(1) An appeal shall lie to the Upper...
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