Tunnel Tech Ltd v Reeves (Valuation Officer)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLady Justice Rafferty,Lady Justice King,THE CHANCELLOR OF THE HIGH COURT
Judgment Date09 July 2015
Neutral Citation[2015] EWCA Civ 718
Docket NumberCase No: C3/2014/2441
Date09 July 2015

[2015] EWCA Civ 718




Deputy Judge HH David Mole QC

Royal Courts of Justice

Strand, London, WC2A 2LL



Lady Justice Rafferty


Lady Justice King

Case No: C3/2014/2441

Tunnel Tech Limited
Reeves (Valuation Officer)

Gordon Nardell QC and James Burton (instructed by Michelmores LLP) for the APPELLANT

Sarabjit Singh (instructed by HMRC Solicitors Office) for the RESPONDENT

Hearing dates : 24 th June 2015




There is a dispute between the appellant, Tunnel Tech Limited ("TTL"), and the respondent valuation officer ("the VO"), as to whether or not the hereditament known as The Old Airfield, Winchester Street, Leckford, Stockbridge, Hants SO20 6DD ("the Hereditament"), is exempt from non-domestic rates under section 51 of the Local Government Finance Act 1988 ("LGFA 1988") as agricultural land or as comprising agricultural buildings within schedule 5 of that Act.


TTL is in the business of mushroom growing. TTL maintains, but the VO disputes, that the Hereditament is agricultural land because it is a market garden or nursery ground within paragraph 2(1)(d) of schedule 5 and, insofar as the market garden status of any of the buildings on the Hereditament is in dispute, the buildings are agricultural buildings within paragraph 3(b) of schedule 5.


The President of the Valuation Tribunal for England ("the Valuation Tribunal"), Professor Graham Zellick QC, concluded that the Hereditament is a market garden within paragraph 2(d) of schedule 5 and ordered on 11 December 2012 that the Hereditament be removed from the non-domestic rating lists for 2005 and 2010 from 1 April 2005 onwards.


By his decision dated 7 April 2014 His Honour David Mole QC, sitting as a deputy judge of the Upper Tribunal (Lands Chamber) ("the UT"), allowed the appeal of the VO from Professor Zellick's order.


This is TTL's appeal from the UT's decision, with the permission of Judge Mole.

The background


Unless otherwise stated, I gratefully take the following statement of facts from the judgment of Judge Mole.


The Hereditament comprises 10 hectares of land, including a reservoir, buildings, hard standings, plant and other structures. It stands in the countryside on the edge of a former airfield about seven miles to the south east of Andover. TTL, a subsidiary of Monaghan Mushrooms Ltd, described by TTL as a major supplier of mushrooms to the UK consumer market, has occupied the Hereditament by virtue of a lease from John Lewis Properties since 1985. During that time the Hereditament has more than doubled in area, a reservoir has been constructed, and buildings have been added, taken away, or put to a slightly different use as production techniques have been developed and refined. The largest structure on the site is the Phase II/III building which came into use in November 2010. It contains nine insulated tunnels, a filling hall and an emptying and dispatch hall, enabling a high degree of atmospheric control of the building and automation of the processes.


The processes which take place on the Hereditament comprise three phases. Phase I begins when TTL buys local organic wheat straw, deep litter poultry manure and agricultural gypsum from various different sources. The straw is thoroughly wetted and after two to four days it starts to heat up through microbial action. Poultry manure, more water and agricultural gypsum are then blended with the warm wet straw and over several days the mixture is turned and moved. The microbial action breaks down the cellulose and lignin within the straw and the mixture becomes a homogenous material with a high moisture content. That material then undergoes high temperature fermentation. Until 2006 this was done in the "Phase I Open Side Building". Since then the material has been put into fermentation bunkers, which have a concrete floor that allows air to be forced through into the material above in a measured way that enables temperature and oxygen concentration to be controlled to produce an efficient high temperature fermentation. The end result is to produce a rich, dark compost that will, with further treatment, provide a nutritious material for the growth of mushroom mycelium.


The material is then pasteurised. This process was originally carried out in polytunnels but, since November 2010, it has almost all been transferred to the new Phase II/III building. The temperature of the material is allowed to rise, initially to about 49°C, followed by a rise to 57°C for about 10 hours and then cooling to 48°C for three to four days of conditioning. At the end of this process any free gaseous ammonia has been metabolised and unwanted animal pests and weed moulds eliminated. The material is then allowed to cool until it reaches 24°C when it is ready for Phase II.


In Phase II the material is taken by conveyor belt into a sterile area where mushroom spawn is applied to it from a hopper at a carefully measured rate. The spawn is mushroom mycelium grown through sterilised wheat or rye grain produced in laboratory conditions. TTL buys this spawn from two specialised sources, Amycel or Sylvan. The spawn is alive but kept dormant by refrigeration to 2°C. Contact with the warm material activates the spawn which starts to grow through it. From 2005 to 2013 a proportion of material was sold at the Phase II stage. This proportion was 63% of total output at 1 April 2005 and down to 0% by 1 February 2013.


In the course of Phase III, by careful control of temperature, the mycelium is encouraged to complete its growth throughout the material. Before 2010 this stage was undertaken in the polytunnels. Now it is done in the purpose-built tunnels in the Phase II/III building. By the end of 18 to 20 days the mycelium pervades the material and is visible as a mass of white tendrils. At that point it is winched out of the tunnel, broken up mechanically and conveyed to the vehicles that take it away. The process of breaking it up breaks the mycelial strands and triggers a reaction known as "reanastamosis", which is a surge in activity as the strands seek to rejoin, causing a peak in temperature shortly after the final material leaves the Hereditament.


The final material is then taken to specialist mushroom farms. TTL says that is for plant health and economic reasons, consistently with the way the growing cycle for mushrooms produced commercially is nearly always divided between two sites.


After TTL's Phase III material has been transferred to the specialist mushroom farms it is covered with a layer of inert material, known as the casing layer, and the mycelium produces "pinheads" which become mature mushroom caps. The total time from the application of mushroom spawn to the harvesting of the first flush is about 5 to 6 weeks. The caps are harvested at the required size and the material is then capable of producing up to another three "flushes" of growth over a period of two to three weeks.


The proportion of the Phase III product sold has grown from 37% of total output as at 1st April 2005 to 100% at 1st February 2013, with most now going to mushroom farms within the Monaghan Mushroom group.


The VO entered the Hereditament in the 2005 and 2010 valuation lists for non-domestic rates. The original entry was "factory and premises". This was later amended to "land used for waste composting" before reverting to "factory and premises".

The statutory provisions


Section 51 of LGFA 1988 provides that schedule 5 shall have effect to determine the extent (if any) to which a hereditament is (for the purposes of that Part of the statute) exempt from local non-domestic rating.


So far as relevant to this appeal schedule 5 provides as follows:



Agricultural premises

1 A hereditament is exempt to the extent that it consists of any of the following—

(a) agricultural land;

(b) agricultural buildings;

2 (1) Agricultural land is—

(a) land used as arable, meadow or pasture ground only,

(b) land used for a plantation or a wood or for the growth of saleable underwood,

(c) land exceeding 0.10 hectare and used for the purposes of poultry farming,

(d) anything which consists of a market garden, nursery ground, orchard or allotment (which here includes an allotment garden within the meaning of the Allotments Act 1922), or

(e) land occupied with, and used solely in connection with the use of, a building which (or buildings each of which) is an agricultural building by virtue of paragraph 4, 5, 6 or 7 below.

(2) But agricultural land does not include—

(a) land occupied together with a house as a park,

(b) gardens (other than market gardens),

(c) pleasure grounds,

(d) land used mainly or exclusively for purposes of sport or recreation, or

(e) land used as a racecourse.

3 A building is an agricultural building if it is not a dwelling and—

(a) it is occupied together with agricultural land and is used solely in connection with agricultural operations on that or other agricultural land, or

(b) it is or forms part of a market garden and is used solely in connection with agricultural operations at the market garden.

8 (1) In paragraphs 1 and 3 to 7 above "agricultural land" shall be construed in accordance with paragraph 2 above.

(2) In paragraphs 1 and 5(5)(b) above "agricultural building" shall be construed in accordance with paragraphs 3 to 7 above.

(3) In determining for the purposes of paragraphs 3 to 7...

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