England and Wales High Court (Administrative Court) Decisions

QUEEN ON APPLICATION OF EDISON FIRST POWER LIMITED v. SECRETARY OF STATE FOR ENVIRONMENT, TRANSPORT AND REGIONS and QUEEN ON APPLICATION OF EDISON FIRST POWER LIMITED v. CENTRAL VALUATION OFFICER [2000] EWHC Admin 317 (31st March, 2000)

CO/604/2000

CO/605/2000

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Mr Richard Drabble QC and Mr Tim Mould, instructed by Treasury Solicitor appeared on behalf of the Secretary of State for the Environment

Mr Nigel Pleming QC and Mr Christopher Lewsley, instructed by Jones Day, appeared on behalf of Edison First Power Limited.

Mr Guy Roots QC and Mr Daniel Toledano, instructed by Freshfields, appeared on behalf of Powergen UK Plc (interested party).

MR JUSTICE CARNWATH:

Factual Background

1. These cases concern liability for non domestic rates in respect of two electricity power stations, Fiddlers Ferry in Cheshire and Ferrybridge C in Yorkshire. Prior to July 1999 the two power stations were owned and occupied by Powergen UK Plc ("Powergen"). Powergen was created when the Central Electricity Generating Board was privatised in 1990. Its business now includes a wide range of activities, one of which is electricity generation. Its electricity generation and transmission businesses are regulated under the Electricity Act 1989.

2. Powergen is a designated person for the purposes of central rating. Property occupied by Powergen for the purposes of electricity generation is subject to central non domestic rating and is included in the central rating list. Central non domestic rates are demanded by, and payable to, central Government (the Secretary of State for the Environment) for inclusion in the rates pool which is subsequently distributed to local authorities. Up to and including the year 1999/2000, the two power stations were subject to central rating, as part of an assessment as a whole of all the hereditaments in England occupied by Powergen for the purposes of electricity generation. The rates paid by Powergen for the year 1999/2000 were calculated on that basis.

3. In 1998, Powergen gave an undertaking to the Secretary of State for Trade and Industry, under the Fair Trading Act 1973, to dispose of a proportion of its coal-fired generating capacity by a date to be specified by him. The date specified was 30^th July 1999. In compliance with that undertaking, it offered the two power stations for sale. In April 1999, Edison First Power Limited (EFPL) entered into an agreement with Powergen to acquire long (199 year) leases of the two power stations and to occupy them for the purposes of the generation of electricity. The purchase was completed on 19^th July 1999. Powergen then ceased to occupy the power stations, and EFPL became the occupier. EFPL is not a designated person. Properties occupied by it are subject to local rating and are included in the local rating list.

4. Part of the agreement (clause 9) was that, upon completion, an apportionment was to be made of various charges and payments in respect of the power stations, including non-domestic rates payable by Powergen in relation to the power stations for the rating year 1999/2000. About £13.5m was claimed by Powergen, as representing the amount paid by it in relation to the two power stations for the part of the rating year when EFPL was in occupation. EFPL has paid that sum, but is contesting the liability in separate arbitration proceedings under the contract. (The terms of the contract are not in issue before me, and nothing I say in this judgment should be taken as expressing any view on the interpretation of the relevant provisions.)

5. Subsequently, local non-domestic rates (of a similar amount) were demanded from EFPL by the local authorities in whose areas the power stations are situated, for the period from the change of occupation in July 1999 to 31st March 2000. Warrington District Council issued a demand on the 19th November 1999 in respect of Fiddlers Ferry. Wakefield Metropolitan District Council issued a demand on the 14th March 2000 in respect of Ferrybridge C. Payments have been made by EFPL under protest. The local authorities had already paid equivalent sums to Central Government (the Secretary of State) for inclusion in the rates pool.

6. The central valuation officer has refused to make any amendment to the central rating list effective from the change of occupation in July 1999. He contends that he can only amend the central rating list with effect from the beginning of the next rate year after a change of occupation, that is, with effect from the 1st April 2000. The Secretary of State has refused to refund the amount paid in respect of the two power stations under the central list for days after the change of occupation in July 1999 up to the 31st March 2000.

The Applicant's case

7. EFPL's case in summary is:

(1) The generating capacity of the two power stations was taken into account in Powergen's central list rateable value for the period from July 1999 to 31st March 2000, and also in EFPL's local list rateable value for the same period. This is double taxation, without statutory authority.

(2) The Secretary of State has used his order-making power in an irrational way, and in breach of the European Convention on Human Rights (ECHR);

(3) The Central Valuation Officer can correct the illegality by altering the central rating list (pursuant to his duty to maintain an accurate list). In the alternative, the Secretary of State can refund one element of the double payment, thereby correcting the unlawful double taxation.

Valuation - background

8. It is useful to begin by setting the relevant parts of the Local Government Act 1988 in their historical context. (This account is taken from Mr Roots' submission). The traditional basis for assessment of value for rating purposes was by reference to "net annual value" of a "hypothetical tenancy". In relation to property which was rarely or never let, valuers had to devise methods which would provide them with evidence of the annual letting value.

9. Two main methods emerged: the contractor's test and the profits' basis. The contractor's test is, in short, interest on the cost of construction; the theory is that a prospective tenant would not agree to pay more by way of rent for the hereditament being valued than it would cost him to borrow money (or use his own) to construct similar premises elsewhere. The profits basis assesses the receipts and expenditure involved in carrying on an undertaking in order to arrive at a figure (the "divisible balance") from which the tenant's share is then deducted, leaving a figure which is available to pay rent to a landlord.

10. Where the undertaking occupied property in several rating areas, a further step involved making an apportionment of the total figure to enable a rateable value to be attributed to each hereditament. The profits basis came to be established as the appropriate basis for assessing canals, railways, docks, water, gas, electricity and similar undertakings. It was eventually held by the House of Lords that it had to be applied as a matter of law to public utility undertakings (Kingston Union -v- Metropolitan Water Board [1926] AC 331).

11. Following the war, most of the public utilities were nationalised. Since they were no longer operated for profit, the profits basis was no longer considered to be the appropriate basis for assessment. Statutory provision was, therefore, made in respect of each industry. So far as the electricity industry was concerned, the bodies set up on nationalisation were not liable to be rated, although they were required to make payments to local authorities in lieu of rates. The structure of the electricity industry was changed by the Electricity Act 1957 (creating the Central Electricity Generating Board, and 12 area boards). At the same time the method of rating the boards was provided for in the Local Government Act 1958, later consolidated into the General Rate Act 1967.

12. Under the General Rate Act 1967, the measure of liability continued to be the rateable value of the hereditament, derived from its net annual value (s19(1)). For the assessment of the nationalised industries, the statutory formulae were retained. The statutory scheme for the rating of the CEGB and each Area Board (under the General Rate Act 1967, s 34) provided that each Board was to be treated as occupying in each rating area a hereditament having a rateable value calculated in accordance with schedule 7. The rateable value was assessed as the value of the distribution and generating activities of each Board. The schedule specified the "basic electricity rateable value" of all Boards (which was amended from time to time by statutory instrument), and then apportioned amongst the Boards to arrive at an aggregate value of each Board's activities. That aggregate value was then apportioned amongst rating areas. In the case of generating activities, the basis of apportionment was the proportion of the Board's total generating capacity situated in the rating area. The rateable value was re-calculated each year by Commissioners in the December preceding the next rate year. There was no mechanism for altering the rateable value during the course of the rate year.

The 1988 statutory framework - general

(a) Central non-domestic rating

13. This system is governed by sections 52 to 54 of the 1988 Act, and regulations made under it. It applies to property which is operated as a whole but physically distributed throughout England, such as railways, canals, gas, electricity, and telecommunications. The valuation of hereditaments in England subject to central non-domestic rating is the responsibility of the Central Valuation Officer ("CVO"). Regulations designate the persons subject to central rating and prescribe in relation to each designated person one or more descriptions of hereditaments. The central rating list shows the identity of each designated person and describes the hereditaments prescribed in relation to him. It also specifies the rateable value (in aggregate) of the groups of hereditaments shown for each designated person, but it does not show a separate value for each hereditament. The rateable values are computed by reference to formulae contained in the statutory instruments. They are recomputed each year. The central valuation officer is under a duty to "maintain" the list, and to prepare a new list in every fifth year. Provision for alteration of the list is made in regulations.

14. Collection of rates on hereditaments shown in the central rating list is the responsibility of the Secretary of State. Rates are payable by the persons named in the central rating list. Liability accrues daily. Central rates may be recovered up to one year in advance subject to adjustment if the amount demanded is found to be in excess of, or less than, the amount payable. The amounts received are paid into the central pool. Local authorities have no role in relation to hereditaments shown in the central rating list.

(b) Local Non Domestic Rating

15. The other system is referred to as local non-domestic rating, and is governed by sections 41 to 51 of the 1988 Act. The valuation of hereditaments in England for this purpose is the responsibility of the Valuation Officer. The amounts of the values of each of the hereditaments are set out (separately for each hereditament) for each day in the local rating list for each district local authority area. The valuation officer is under a duty to "maintain" the local list, and to prepare a new list in every fifth year, and provision for alteration is made in regulations.

16. Collection of rates on hereditaments shown in the local rating list is the responsibility of district local authorities, referred to in this context as "billing authorities". The identity of the occupier of each local non domestic hereditament on any day is not shown in the rating list, but is held in the records of the billing authority as part of its administration of its collection fund. Liability accrues daily. Local rates may be recovered up to one year in advance subject to adjustment if the amount demanded is found to be in excess of, or less than, the amount payable.

Contents of the Central List

17. The contents of a central non-domestic rating list are provided for by s 53. With a view to securing "the central rating en bloc of certain hereditaments", the Secretary of State may make regulations designating a person and prescribing in relation to him one or more descriptions of relevant non domestic hereditaments (s 53(1)). Where the regulations so require (as they do in this case), the central list must show the name of the designated person and against that name -

"... each hereditament ... which on the day concerned -

(a) is occupied... by him, and

(b) falls within any description prescribed in relation to him." (s 53(2))

For "each such day" the list must also show against his name "the rateable value (as a whole) of the hereditaments so shown" (s 53(3)).

18. These requirements have to be read with section 67(9). That provides that a hereditament shall be treated as shown in a central non-domestic rating list for a day, if on that day "it falls within a class of hereditament shown for the day in the list." For that purpose "class" means:

"..... a class expressed by reference to whether hereditaments -

(a) are occupied or owned by a person designated under section 53(1) above, and

(b) fall within any description prescribed in relation to him under section 53(1)." (S 67 (9A))

19. For the purposes of the central list for the period beginning on 1 April 1995, the Secretary of State exercised his powers of designation and prescription by means of The Central Rating Lists Regulations 1994 (SI 1994 No. 3121) ["the 1994 Regulations"]. In respect of electricity supply hereditaments, he designated Powergen and prescribed, in relation to Powergen -

"hereditaments (other than excepted hereditaments) wholly or mainly used for the purposes of the generation of electrical power or for ancillary purposes" (reg. 5(1), Schedule Part 2).

Valuation under the 1988 Act

20. The traditional "hypothetical tenancy" basis is preserved as the ordinary basis in the 1988 Act: that is, the "rent which it is estimated that the hereditament might reasonably be expected to be let from year to year..." (on certain specified assumptions) (sch 6, para 2(1)). However, in relation to particular classes of hereditaments, the Secretary of State is empowered to disapply the ordinary basis, and make special provision by order. The relevant provisions are paragraphs 3(1) and (2) of Schedule 6, which provide -

"(1) The Secretary of State may by order provide that in the case of non-domestic hereditaments of such class as may be prescribed -

(a) paragraphs 2 to 2C above shall not apply, and

(b) its rateable value shall be such as is determined in accordance with prescribed rules.

(2) The Secretary of State may by order provide that in the case of non-domestic hereditaments to be shown in the central non-domestic list -

(a) paragraphs 2 to 2C above shall not apply, and

(b) their rateable value shall be such as is specified in the order or determined in accordance with prescribed rules."

The procedure for such orders requires an affirmative resolution of each House of Parliament (s 143(8)).

21. The order under consideration in the present case is the Electricity Supply Industry (Rateable Values) Order 1994, which came into force in December 1994, and provided the basis for the valuation of hereditaments in the electricity industry for the ensuing five years. It dealt with both local and central lists. The calculations were based on "declared net capacity" ("DNC"), that is the "highest generation of electricity... which can be maintained indefinitely without causing damage to the plant..." (less capacity consumed by the plant) (art 2). For power stations in local lists rateable value for any year from 1^st April 1995 was fixed at £11,620 per megawatt of DNC.

22. In relation to the central list a global approach was adopted. The two bodies principally concerned were Powergen plc and National Power plc. There were separate classes for England and Wales. The classes were defined by reference to the classes of hereditaments defined in the 1994 regulations. A rateable value for each such class for the year beginning 1^st April 1995 was "specified" (defined as "T"); in the case of Powergen the figure for England was £178.8823m (arts 7(1), 8A(2)(a), sched pt 1). (There was provision for an adjustment ("V") for changes between December 1994, when the figure was calculated, and April 1995, when it came into effect: (art 8A(2)). For each subsequent year, the specified amount was to be adjusted by reference to a "recalculation factor" (defined as "U"), designed to reflect any change in the total DNC of generating plant in the class, taken at 31^st March in the immediately preceding year, as compared with 31^st March 1995 (art 8A(2)(b), 9).

23. The basis on which the initial figure for Powergen was calculated does not appear from the Order itself. It is, however, common ground (and is evident from the contemporary documents) that the starting point was the net book value of the rateable assets as shown in Powergen's current cost accounts. Allowances were made for particular disabilities of the hereditaments, to leave the effective capital value, which was converted into an annual rateable value by the application of a 6% decapitalisation rate. (This corresponded to the so-called "contractor's basis" of rating valuation.)

24. This figure embraced all property in England within the specified description. It included operational and non operational property, but focused primarily on property used for electricity generation. Items such as offices and other property not on operational land were "excepted" from the specified description. It is common ground that the rateable value of the class of hereditaments occupied by Powergen for the rate year beginning 1st April 1999 was assessed on the basis that the class included Fiddler's Ferry and Ferrybridge power stations.

Alteration of lists

25. Provision for alteration of the central and local lists is made by regulations under section 55 (Non-domestic Rating (Alteration of Lists and Appeals) Regulations 1993). Proposals for alteration of local lists may be made on a number of grounds: including, for example, (b) that the rateable value shown is "inaccurate by reason of a material change of circumstances which occurred on or after the day on which the list was compiled"; and (g) "that a hereditament shown in the list ought not to be shown in that list" (reg 4A). The amendment will normally have effect from the day when the change took place (reg 13).

26. The grounds for alteration of the Central List are more shortly stated. Proposals may be made by designated persons on the grounds that "in respect of any of its designated hereditaments the rateable value shown in the list is not the amount properly determined in accordance with an order under paragraph 3(2) of Schedule 6..."

Double taxation and the Milford Haven case

27. There is no dispute that there is a presumption against double taxation, rebuttable only by express words or by inevitable inference. The general principle appears in the words of Lord Oliver, in the context of income tax, in R v Inland Revenue Commissioners, ex parte Woolwich Equitable Building Society [1990] 1 WLR 1400 Lord Oliver said (1412H) -

"The suggested inhibition against such cumulative taxation lies not in the words which Parliament has chosen to use but in certain well established presumptions or principles - a presumption against double taxation, a presumption that income tax, being an annual tax is payable only on the income of a particular year and so on. But these are only presumptions. They are clearly rebuttable if sufficiently clear express words are used. But they can also be rebutted, as it seems to me, by circumstances surrounding the enactment of particular legislation which lead to an inevitable inference that Parliament intended, in using the words that it did, that these presumptions or principles should not apply."

28. The general presumption is well-established in the context of rating. For example -

Smith v Lambeth Assessment Committee (1882) 9 QBD 585, per Field J, p 593

"Except in the case of joint occupation, there cannot be two persons liable to be rated for the same thing".

Westminster City Council v Southern Rly Co [1936] AC 511 per Lord Wright MR, p 565

"...they [ie the rating authority] got their rates from the railway, if they did not get them from WH Smith & Son, and they could not get them twice over."

Brook v National Coal Board [1975] RA 367, which concerned the assessment of a spoil heap at a mine, per Lord Denning MR, p 371

"In the circumstances it seems to me that the spoil heap can and should be treated as a separate hereditament. But by doing so there is no danger of any double assessment. The tribunal found that the assessment of the mine did not contain any element of value which could be directly attributed to the appeal heap."

29. However, it is equally clear that the presumption can be overridden by suitable statutory language. The clearest illustration of this, and the authority of most direct assistance in the present case, is Milford Haven Conservancy Board v Inland Revenue Commissioners and Others [1976] 1 WLR 817. By virtue of Orders made in 1971 and 1973 under special provisions of the General Rate Act 1967, the valuation of the board's hereditaments was changed from the ordinary "hypothetical tenant" basis, to a formula based on "relevant receipts". The relevant receipts included harbour dues on vessels entering and leaving the haven, and other categories of income such as payments for services of pilots, and also the rent of a cottage which was separately rated in the name of the tenant. The overall effect of the change was to increase the rateable value from £4,602, under the previous system, to £55,000 in 1976 (p823G). The empowering section provided (in relation to various types of undertaking, including harbour undertakings) -

"The Minister may by order make provision for determining the rateable value of hereditaments to which this section applies, or any class or description of such hereditaments specified in the order, by such method as may be so specified...".

The board contended that the Order was ultra vires, because Parliament could not have intended to give power to the Secretary of State "to make such a fundamental amendment of the law by his orders".

30. This contention was rejected. Giving the leading judgment in the Court of Appeal, Cairns LJ summarised certain basic principles of rating law, including the principle that receipts not dependent on occupation of a hereditament cannot be taken into account, and the presumption against "double assessment". He cited Smith v Lambeth Assessment Committee (see above) for this proposition -

"Double assessment is not permitted. So where a tenant is assessed to rates, the landlord is not to be assessed too." (p 824B-C)

He contrasted those principles with the effect of the Order, to show "how great a departure from the classical rules about rating is involved in the order complained of." (p824D) Nonetheless, he concluded -

"In my view, the language ... is sufficiently clear to entitle the Secretary of State to prescribe any method of valuation, however far it departs from previously established principles. I cannot find in the words of the section any such ambiguity as the court could be asked to resolve in favour of the ratepayer. Nor does it appear to me that the Orders deal in any respect with liability to rates as distinct from valuation for rates. It cannot be said that the Orders seek to impose rates on the haven or on the dues, investment income or rents received. When the profits basis of valuation is adopted it is not the profits which are being rated, but the hereditaments..." (p 824G-H).

31. The other two members of the Court agreed. In relation to the cottage rents, Scarman LJ said this (p 827E) :

"I confess that I am less than happy on the question of `double-rating', though the amounts in question are not large. It appears wrong that rates should be paid twice - once by the tenant and secondly by the landlord. But this wrong - if it be a wrong - does not avail the Board if, upon their true construction, the two Orders of the Secretary of State are, as I think they are, concerned only with method of valuation. It is a wrong which the Secretary of State can, if he thinks fit, remedy by further order ; it goes to the fairness of the method, not the power of the Minister."

32. The reasoning of that case was treated by Auld J as applicable to paragraph 3 of Schedule 6, in R v Secretary of State for the Environment, ex p British Telecommunications Plc [1991] RA 307, although not there in the context of alleged "double assessment". He said:

"The whole purpose of para 3 of sch 6 is to free [the Secretaries of State] from the normal mode of rating valuation where he so orders. It imposes no restraint upon the selection and form of substitute for that mode save that they must specify it or prescribe rules for its determination, and the whole Order is subject to approval by affirmative resolution in each House of Parliament. It is hard to see how the Secretary of State can be said to have stepped outside "the four corners" of the Act... (p 330)

"...the central proposition to be derived from the Milford Haven case [is] that a rating statute can, if sufficiently clearly expressed, empower a Minister to introduce for special cases a system of valuation different from the normal mode of rating valuation. The reasoning in that case is equally applicable to the case before me. The 1988 Act provided a machinery to enable the Secretaries of State to depart from the normal methods of rating valuation where they were difficult to apply and gave them complete freedom, subject to Parliamentary approval, as to what method of valuation they should substitute. The words of the Act, in para 3 of sch 6 are plain; they are not contrary to any policy of the Act, which is to give the Secretaries of State a free hand ..." (p 333).

The issues in this case

33. The following issues seem to me to arise:-

(1) Is there double assessment on the facts of this case?

(2) If so, is that permitted, expressly or by necessary implication, by the statute?

(3) Alternatively, can the Order be challenged on grounds of irrationality, or under the Convention?

(4) How if at all can the illegality or unfairness be corrected?

(5) Are there any discretionary grounds for refusing relief?

(1) Is there double assessment?

34. The answer to this question seems to be clearly, yes. The rateable value by reference to which Powergen paid rates under the central system was calculated on an annual basis, which included the two power stations. There was no adjustment to reflect the fact that they ceased to be occupied by Powergen after July 1999. For the remainder of the year they were included in the local list and rates were paid by EFPL on that basis. Thus for that period the Secretary of State has received payments relating to the power stations from both Powergen and EFPL. This is "double assessment" as Cairns LJ described it, in that two ratepayers are being assessed from the same thing - or (in Lord Denning's words) "the same element of value". This was common ground between Mr Pleming for EFPL and Mr Roots for Powergen. In the end, as I understood him, Mr Drabble for the Secretary of State did not seriously contest it.

(2) Is the double assessment permitted by the statute?

35. The issue here is whether Parliament has expressly or impliedly empowered the making of an order having such effect - whether it is within "the four corners" of the statute (as Cairns LJ put it). This is best treated as distinct from the question (considered next) whether, assuming such an order was within the powers conferred by Parliament, it was a proper exercise of the Secretary of State's powers in the circumstances of this case.

36. Mr Drabble, for the Secretary of State, rightly emphasises the importance of the Milford Haven case, in showing the width of the discretion entrusted to the Secretary of State. As the Court of Appeal held, it enabled the Secretary of State "to prescribe any method of valuation, however far it departs from previously established principles" (including the presumption against double assessment). The language of paragraph 3 of Schedule 6, as Auld J made clear, is apt to confer a similar discretion.

37. However, Mr Pleming does not challenge the valuation method as such; his argument is about liability. In the Milford Haven case, there was no issue as to the occupation by the Board of the relevant hereditament during the period under consideration, and the Court of Appeal accepted that the order was concerned with valuation rather than liability. Here, the complaint is that Powergen should not have been held liable to pay rates at all in relation to a period after they had ceased to be in rateable occupation, and during which EFPL were in occupation and were being held separately liable. Accordingly, the Milford Haven case does not provide a complete answer.

38. The answer depends on an examination of the provisions relating to the local list and the central list, and their interaction. It is clear that the two lists are seen as mutually exclusive. Thus, section 42, which deals with the contents of the local list, requires there to be included "for each day" every relevant non-domestic hereditament in the authority's area, but excluding "a hereditament which must be shown for the day in a central non-domestic rating list"(s 42(1)(d)). In principle, therefore it should not be possible for a hereditament to be in both lists on the same day.

39. It is also clear, under both lists, that in principle liability is imposed on a daily basis. Sections 43 (for the local list) and 54 (for the central list) provide for the amount for any chargeable day to be calculated by reference to the same formula (A x B) ÷ C, where A is the rateable value "shown for the day" in the list, B is the non-domestic rate multiplier for the financial year, and C is the number of days in the financial year (ss 42(4), 43(4), 54(4)). Thus, under the local list, which deals separately with each hereditament, someone who occupies a particular hereditament for only part of the year will be liable only for a proportionate part of the annual rate for the hereditament.

40. It is the Central List scheme which results in Powergen being liable "in respect of a period" when they do not occupy. However, that seems to me to be inherent in the statutory scheme. I would emphasise four features, expressly authorised by the statute itself:

(1) the Powergen hereditaments are not required to be shown individually in the list, but may be identified as a class, expressed by reference to Powergen's occupation (s 67(9));

(2) they are intended to be rated "en bloc", and valued "as a whole" (s 53(1)(2));

(3) liability falls on a person for any day in which his name appears in the valuation list (s 54(1)), and does not depend on occupation on that day (as under the local list - see s 43(1)(a));

(4) the calculation of the daily amount of the charge is based on a formula which takes no account of changes in occupation, but simply takes an annual rateable value, divided by the number of days in the year (s 54(4)-(7)).

41. It is implicit in this structure that the daily charge will continue to fall on the designated person, so long as his name remains in the list, and will be calculated by reference to the same annual value, determined in aggregate for the class, regardless of changes during the year in the hereditaments making up the class. Given that the local list, by contrast, operates on a basis which does take into account changes in occupation during the year, it inevitably follows that, where there is a transfer from one to the other, there is the possibility of either double assessment or no assessment at all.

42. Accordingly, in my view, the second question must be answered against the applicant.

(3) Irrationality or breach of Convention

43. Even if the scheme embodied in the orders is within the four corners of the statute, it may be open to challenge on Wednesbury grounds as an improper exercise of the Secretary of State's discretion. However, when dealing with an order relating to financial administration, subject to the affirmative resolution procedure, such grounds are relatively limited. In the leading case, R-v- Secretary of State ex parte Nottinghamshire County Council [1986] AC 240, in relation to the exercise of administrative discretion subject to approval of the House of Commons in the field of "public financial administration" Lord Scarman declined to examine the detail of the provisions in question because

"such an examination by a court would be justified only if a prima facie case were to be shown for holding that the Secretary of State had acted in bad faith, or for an improper motive, or that the consequences of his guidance were so absurd that he must have taken leave of his senses. The evidence comes nowhere establishing any of these propositions." (p247H).

44. Mr Pleming's case in summary is that the scheme is not only unfair in that it produces double assessment, but it also has absurd results, which could have been avoided by providing for adjustments when a transfer took place. He demonstrates the absurdity by imagining a case where Powergen, instead of selling two of its major power stations, had sold them all except for one of the smaller ones (Ratcliffe GT). On the figures, Powergen would continue to pay a total rates bill of £68million when the true figure, based on its actual occupation, would be only about £200,000.

45. Mr Drabble, for the Secretary of State, does not dispute that it would have been possible within the powers of the Act, to create a system which allowed for adjustment of the central values on a transfer. However, he submits that there is nothing irrational in the Secretary of State adopting the scheme he has. He is supported in this by Powergen itself. The system as adopted was subject to detailed discussions with the electricity industry before it was brought into effect. It was accepted by Powergen and others because, as Mr David Rogers explains, it gave rise to "swings and roundabouts" in practice: that is, it operated in their favour when new plant was being commissioned during the year, and against them when plant was being decommissioned or sold. In practice, it seems, Powergen were able to arrange things so that the balance of advantage worked in their favour. Thus, the evidence shows a number of examples of power stations being decommissioned at the end of March, with the result that the period for which rates were being paid without occupation was kept to a minimum. Indeed, Powergen give three examples of the system working its favour, and only one of the opposite effect, that being the sale of the two power stations to EFPL.

46. I should note at this point a possible dispute as to whether the question of double assessment was addressed at the time of the consultations. There was correspondence in November 1994, in which the Electricity Association raised a point about the "need to ensure that the transfer of properties from the central rating list to the local list is reflected in a pro rata reduction in the statutory instrument rateable value to avoid double counting" (Rogers' affidavit para 20). However, Mr Colski, of the Department suggests that this concern was related to properties ancillary to the generation of electricity (such as training and recreational facilities), which would not be taken into account even in the annual recalculation factor (based on generating capacity). I do not find it necessary to resolve this dispute, since it does not seem to me to have any relevance to whether the scheme is inherently irrational.

47. In any event, the system does not seem to have given rise to significant problems, until the Government introduced a policy of extending competition in the generation market, by requiring sale of power stations by National Power and Powergen. The double taxation point was referred to in a letter from Jones Laing Wootton to the Department dated 4^th September 1998 on behalf of Eastern Generation. The letter refers to five power stations which had been acquired from National Power and Powergen in June to July 1996, with the result that "double rates" had been paid for the remainder of the year. This drew a response from the DETR dated 8^th September 1998 which explained the position thus:

"For National Power and Powergen to have a true assessment for all the year, it would have been necessary to amend the list each time their total DNC changed. This would have led to several changes per year to each assessment. Therefore, in the interest of good administration, it was decided to make only one adjustment a year based on the position at 31^st March. Both companies gain as well lose from these arrangements, as any increased DNC or new plants are `rate free' until the end of the year. Both Powergen and National Power, who were consulted before the order was made, were happy with this `swings and roundabouts' approach".

48. The issue does not seem to have been pursued by the Eastern Generation at that time. The explanation of the thinking behind the system is consistent with the evidence in this case, and I accept it as accurate. Mr Pleming contends that "administrative convenience" is not a sufficient ground for imposing a manifestly unfair system. As he says, the system may have been acceptable to National Power and Powergen, in view of the "swings and roundabouts" within the operation of the central list. However, this does not help those who, like his clients, are outside that system.

49. The difficulty with this argument, in my view, is that the system was not imposed upon EFPL without any opportunity to avoid it. The basis of the system was well-established long before they entered into their contract with Powergen. The reason they now find themselves with potential liability for two sets of rates is because of the terms of the contract they entered into with Powergen (subject to any disputes about its interpretation). I do not see this point as one which in any way detracts from their interest to bring these proceedings. They have an entirely legitimate interest in ensuring that the rating system for the industry of which they form a part is properly administered, quite apart from any direct financial interest they have in the outcome. However, it does mean that the adverse consequences resulting from the double assessment are to some extent self-imposed.

50. The most they can say, looking at the matter objectively, is, on the one hand, that the arrangements distort the market, in that negotiations for sale of these power stations to anyone other than National Power had to take into account that the very fact of sale would create an additional rate burden; and, on the other hand, that they result in a windfall for the Secretary of State. However, there is no suggestion that this was a consequence which the Secretary of State had in mind in 1995, when the system was set up, or that there was any bad faith involved. The system has in fact now been changed with effect from April 2000, in a way which will avoid similar problems in the future.

51. I come back to what was said in the Nottinghamshire case. In my view the same has to be said here. Although the scheme works to the disadvantage of EFPL in the circumstances of this case, they are part of a system which was the subject of extensive consultation before it was established, and has been accepted by the industry in general as fair. The distortion of the market in relation to a transaction such as involved EFPL is not such as to render the whole scheme irrational.

52. Mr Pleming also prays in aid Article 1 of the First Protocol of the European Convention on Human Rights. I was referred to the decision of the European Court of Human Rights in Gasus Dosier GMBH -v- Netherlands [1995] 20 EHRR 403, which shows that, even in relation to taxation, the Court may enquire whether there is a "fair balance" between the demands of the general interest of the community and the requirements of the protection of fundamental rights (para 62). However, the orders with which I am dealing, and the events in question, took place long before the Human Rights Act came into effect. I see no room therefore for the direct application of the Convention. The general principles of the Convention, of course, have been accepted, even before 2nd October this year, in construing discretionary powers. However, they do not seem to me to add anything to the principles on which Mr Pleming is entitled to rely under the Common Law.

(4) Correcting the unfairness

53. Mr Pleming makes in effect two points under this head. First, he suggests that double assessment could and should have been avoided by the CVO amending the Central Rating List from July 1999. Secondly, he relies on the general principle that money paid by a subject to a public authority, in the form of taxes pursuant to an ultra vires demand, is recoverable as of right at Common Law (Woolwich Equitable -v- IRC [1993] AC 70). The second point is not in issue as a matter of principle, but it begs the question whether the demand was ultra vires; I have held that it was not. On the first point, he relies on the general duty of the CVO to "maintain" the list. He contends that this impliedly imposes a duty on the CVO to make alterations necessary to maintain an accurate list, even in situations not directly covered by the alteration regulations. He says that the Central List became inaccurate after July 1999, because the rateable value included the value of hereditaments which Powergen did not occupy. Again this begs a question which I have already decided. As I have said, the liability after July 1999 depended, not on whether Powergen occupied the hereditaments, but whether it was named in the List. The Valuation Officer had no power to alter the effect of the statutory scheme. Accordingly, even if the power to "maintain" implies a possibility of alterations outside the regulations, it does not assist the applicants.

Discretionary Relief

54. In the circumstances this issue does not arise. For completeness, however, I should indicate that, had I been satisfied that there was unlawful double assessment, as Mr Pleming contends, I would not have denied relief on the grounds of lack of interest. I would however, have wished to limit the effect of any order I made to remedying the effects on EFPL, without otherwise affecting the operation of the system up to that point. I have noted the submissions on this point made by the parties after the end of the hearing. In the event, it is unnecessary for me to comment upon them.

Conclusion

55. For these reasons, while I have sympathy for EFPL in finding itself the unwilling source of a windfall for the Secretary of State, I am satisfied that it has no legal grounds of complaint in this Court. Accordingly, the application fails.