England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice Strand London WC2A 2LL
		18th March 2008

1. MRS JUSTICE DOBBS: This is a statutory appeal in relation to a decision of the Valuation Tribunal in December 2005 which determined that Mr Marshall's property at 23 Oakleigh Drive, Swaffham in Norfolk should be entered into the Council Tax List at Band B rather than Band C from 17th May 2005. The decision had the effect of reducing Mr Marshall's Council Tax bill by about £150 per year. The order of the Tribunal was as follows:

"The Tribunal orders the Listing Officer to alter the Valuation List in respect of 23 Oakleigh Drive, Swaffham by deleting the existing entry and inserting the determined Council Tax Band B with an effective date of 17th May 2005, which is confirmed on the accompanying Notice of Decision. The appeal is therefore allowed."

The issue is whether the Valuation Tribunal erred in ordering the Listing Officer to alter the list so as to show an effective date other than one derived by applying regulation 14 of the Council Tax (Alteration of Lists and Appeals) Regulations 1993.

The Background

2. The respondent bought his house at the address mentioned on 22nd December 2003 for £134,950. It was entered into the property list on 1st January 2004 and entered into Band C. This was based on a 1st April 1991 valuation, because under Regulation 6(1) of the Council Tax (Situation and Valuation of Dwellings) Regulations 1992, the value of a dwelling is taken to be the amount which a dwelling might reasonably have been expected to realise if sold on the open market on 1st April 1991, subject to the assumptions in Regulation 6(2). This valuation applies even, as in this case, it precedes the construction of the dwelling by several years. The valuation exercise involves establishing the price at which the dwelling would have sold in the open market, subject to the prescribed assumptions, if it had existed in its built form on 1st April 1991. The Listing Officer, the appellant in this case, valued the property at £57,500, which was a figure within the range covered by valuation Band C.
3. On 22nd June 2004 the respondent proposed an alteration of the list so as to show the property in Band B. He was claiming that the property had been wrongly banded from the start, as opposed to claiming a material reduction in the value of the house since that date. This proposal was rejected by the appellant, who was bound under Regulation 13 of the 1993 Regulations to refer the disagreement to the Valuation Tribunal. The Tribunal convened on 11th November 2005 and allowed the appeal with, as I have indicated, the revised decision being dated 12th December 2005.
4. The reason for allowing the appeal was that the Tribunal considered that the dwelling would not have achieved an open market figure in excess of £52,000 as at 1st April 1991 had current circumstances prevailed at that date. It took the view that the date of alteration of the existing Council Tax Band should have effect from 17th May 2005, the date on which the official transfer of the estate to the management company occurred, giving rise to an increased financial liability in respect of the property. This was the date when the respondent became liable to pay an increased service charge.
5. It is common ground that the Tribunal had no power to make the alteration effective as of 17th May 2005. It is also common ground that this is not a "material reduction" case, and that the only basis upon which the Listing Officer might have agreed to alter the valuation band is the ground in Regulation 4(b)(i), namely that the Listing Officer is satisfied that a different valuation of land should have been determined by her as applicable to the dwelling. If she had been so satisfied she would have altered it with effect from 1st January 2004. Thus the same task befell the Valuation Tribunal. Thus, if they considered that the property had been assigned to the wrong band, then they should have ordered it to be altered with effect from 1st January 2004 under regulation 7. This is also common ground.
6. However, the appellant goes on to argue that as the Valuation Tribunal found that there was a reduction in value, and as it was not a material reduction within the sense of Section 24(10), the Tribunal could not rely on Regulation 14(3) to fix the effective date of 17th May 2005, and none of the other provisions of Section 14 allowed for an alteration other than as from 1st January 2004. It is argued that since the Tribunal considered that it was only on 17th May 2005 that the dwelling suffered a sufficient reduction in value so as to affect its valuation band, it follows that the original valuation of the Listing Officer was correct, and from that it is argued, that there is no lawful basis for redetermination of the appeal and no point in remitting it. They invite the court to set aside the decision and dismiss the appeal; alternatively, to set it aside and remit for redetermination.
7. The respondent argues that the Tribunal findings of fact, taken together with the statutory valuation assumptions required to be made, are consistent only with a determination to alter the banding with an effective date of 1st January 2004, and therefore the appropriate order on appeal, is to vary the order so as to effect the alteration as of 1st January 2004. In the alternative, it is submitted that the case should be remitted to the Tribunal for reconsideration.

The Statutory Framework

8. Sections 21 to 22 of the Local Government Finance Act 1992 deal with valuations for the purposes of lists and the compilation and maintenance of lists. There is no need to set these sections out in extenso. Section 24 deals with the alterations of lists. In determining the value of a property constructed since 1st April 1993, a Listing Officer is obliged to ascertain the value of the dwelling as of 1st April 1991. The Listing Officer is obliged to apply Regulation 6 of the Council Tax (Situation and Valuation of Dwellings) Regulations 1992 ("the 1992 Regulations") which provides:

"(1) Subject to regulation 7, for the purposes of valuations under section 21 (valuations for purposes of lists) of the Act, the value of any dwelling shall be taken to be the amount which, on the assumptions mentioned in paragraphs (2) and (3) below, the dwelling might reasonably have been expected to realise if it had been sold in the open market by a willing vendor on 1st April 1991.

(2) The assumptions are --

(a) that the sale was with vacant possession;

(b) that the interest sold was the freehold or, in the case of a flat, a lease for 99 years at a nominal rent;

(c) that the dwelling was sold free from any rent charge or other incumbrance;

(d) except in a case to which paragraph (3) applies, that the size, layout and character of the dwelling, and the physical state of its locality, were the same as at the relevant date;

(e) that the dwelling was in a state of reasonable repair;

(f) in the case of a dwelling the owner or occupier of which is entitled to use common parts, that those parts were in a like state of repair and the purchaser would be liable to contribute towards the cost of keeping them in such a state;

(g) in the case of a dwelling which contains fixtures to which this sub-paragraph applies, that the fixtures were not included in the dwelling;

(h) that the use of the dwelling would be permanently restricted to use as a private dwelling; and

(i) that the dwelling had no development value other than value attributable to permitted development.

(3) In the case of a valuation carried out for the purposes of an alteration of the valuation list resulting from a material reduction in the value of the dwelling, it shall be assumed that --

(a) the physical state of the locality of the dwelling was the same as on the date from which the alteration of the list would have effect; and

(b) the size, layout and character of the dwelling were the same --

(i) in the case of an alteration resulting from a change to the physical condition of the dwelling, as on the date from which the alteration of the list would have effect;

(ii) in a case where there has been a previous alteration of the valuation list in relation to the dwelling, as on the date from which that alteration had effect;

(iii) in a case where in relation to the dwelling, there has been a relevant transaction within the meaning of section 24, not resulting in an alteration of the valuation list, as on the date of that transaction;

(iv) in a case to which more than one of sub-paragraphs (i) to (iii) applies, as on whichever is the latest of the dates there mentioned; and

(v) in any other case, as on 1st April 1993.

(4) Sub-paragraph (g) of paragraph (2) applies to any fixtures which --

(a) are designed to make the dwelling suitable for use by a physically disabled person; and

(b) add to the value of the dwelling.

(5) In paragraph (2) --

"common parts", in relation to a dwelling, means any part of a building containing the dwelling and any land or premises which the owner or occupier of the dwelling is entitled to use in common with the owners or occupiers of other premises in the immediate locality;

"flat" has the same meaning as in Part V of the Housing Act 1985[7];

"permitted development" means development for which under the Town and Country Planning Act 1990[8] planning permission is not required, or for which no application for planning permission is required;

"relevant date" means-

(a) in the case of a valuation carried out for the purposes of an alteration of the valuation list, the day from which that alteration would have affect; or

(b) in any other case, the day on which the valuation is made;

"rentcharge" has the same meaning as in the Rentcharges Act 1977.

(6) In determining what is "reasonable repair" in relation to a dwelling for the purposes of paragraph (2), the age and character of the dwelling and its locality shall be taken into account."

9. As with all valuation assumptions, the Listing Officer is obliged to assume that the conditions in Regulation 6(2) exist even where they do not. The authority for that proposition can be found in R v East Sussex Valuation Tribunal ex parte Silverstone [1996] RVR 203.
10. When a taxpayer wishes to challenge the band his property is placed in, it can be done on two grounds. Firstly, that the valuation was wrong from the outset. This is covered by Regulation 4(1)(b) which reads as follows:

"No alteration shall be made of a valuation band shown in a list as applicable to any dwelling unless -- . . .

(b) the Listing Officer is satisfied that --

(i) a different valuation band should have been determined by him as applicable to the dwelling."

The alternative challenge is to argue that the original banding was correct, but that the banding should be changed due to a reduction in the value occurring since the original listing. The relevant provisions are Regulation 4(1)(a)(ii) of the 1993 Regulations and also "material reduction" as defined by Section 24(10) of the 1992 Act.

11. Under the statutory provisions set out above, the task which the Valuation Tribunal was obliged to undertake in response to Mr Marshall's proposal to alter the register and its refusal by the Listing Officer was as follows --

(1) It was to consider whether the property had been put into the wrong band as at 1st January 2004.

(2) In order to do so, it had to ascertain the property's value, as at 1st April 1991, in accordance with the statutory assumptions. This would involve a hypothetical sale on that date:

(a) taking the property in its actual location and with its actual character as at 1st January 2004;

(b) making the assumptions required by reg 6(2). The estate roads and landscaped areas of the estate are 'common parts' within reg 6(2)(f), so the Tribunal was obliged to assume that those areas were in a state of reasonable repair and that the purchaser would be liable to contribute towards keeping them in such a state;

(c) taking into account any other factors about the property which would affect its value. These would include concerns in the market about contamination of the site and planning restrictions on occupancy: see Re the Appeal of Grampian Valuation Joint Board Assessor [2003] RA 167.

(3) If the Tribunal concluded that the property's value on that basis did not exceed £52,000, then it should have ordered an alteration of the list to show the property in Band B with effect from 1st January 2004.

(4) If the Tribunal concluded that the property's value on that basis did exceed £52,000, then it should have dismissed Mr Marshall's appeal.

12. As noted, it is common ground that the Valuation Tribunal should not have made the effect of the rebanding to run from 17th May 2005, and the court so finds. The real issue before the court is what the court should now do, the Valuation Tribunal having made an error of law. The powers of this court are set out in Regulation 32 of the 1993 Regulations. An appeal lies to the High Court on a question of law arising out of a decision or order of the Valuation Tribunal and, by subsection (4) of that Regulation, the Appeal Court has power to confirm, vary, set aside, revoke or remit the decision or order of the Tribunal and may make any order that the Tribunal could have made.
13. There is a dispute between the parties about the interpretation of the factual findings of the Tribunal. The appellant submits that the findings were such that the Valuation Tribunal found a change of circumstances as from May 2005, and thus the situation cannot be rectified. The respondent argues that the facts evidence a different finding, namely that the property was wrongly valued from the outset.
14. The respondent makes a number of points: (a) that the Valuation Tribunal was well aware that it had to determine a value and statutory assumptions on the basis of a hypothetical sale on 1st April 1991, even though the property had not yet been constructed; (b) that the appellant had attempted to support his Band C valuation by reference to a number of comparable properties but that these submissions were rejected. The Tribunal found that as of 1st April 1991 the property would not have achieved a figure in excess of £52,000, such figure being necessary for the identity of Band C; and (c) the Tribunal also took into account current circumstances which they were entitled to and findings which cannot be disturbed on appeal. The error came when they sought to translate their findings of fact into an order, which they should have done on 1st January 2004 as opposed to the 17th May 2005.
15. The decision of the Tribunal is to be found at pages 41-45 of the bundle. The reasons are set out from the bottom of page 43 to the top of page 45. They read as follows:

"Having considered the submissions of the parties including that of the Listing Officer supporting the existing entry in the Valuation List together with that of the appellant in support of the contention that the existing band is incorrect, the Tribunal is satisfied that upon the weight of evidence presented the Council Tax Band currently appearing in the Valuation List in respect of the subject property should be amended.

In reaching its conclusion, the Tribunal is aware that in accordance with section 6 of the Council Tax (Situation and Valuation of Dwellings) Regulations 1992, the value of a dwelling might reasonably have been expected to realise if sold in the open market on 1st April 1991, notwithstanding the appeal dwelling was actually built several years after this date.

The Tribunal accepts the best evidence of a dwelling's value is that derived from an open market transaction occurring on the property itself, since it is the price actually paid by a willing vendor that provides it with the clearest indication of its actual open market value. This is particularly relevant when a transaction has taken place close to the antecedent valuation date. However, it accepts the further from that date a transaction has occurred, the less weight in terms of valuation evidence it will provide. Where sufficiently adequate alternative evidence is to be found by the transactions of other properties, the closer they are in age, size, location, type and accommodation to the appeal property the more appropriate is their comparison to the subject dwelling.

Having given careful consideration to the comparable sales evidence submitted by the Listing Officer, the Tribunal is not satisfied that the properties referred to by him provide it with an accurate reflection of the restrictions encountered at the appeal dwelling. While it accepts they are broadly similar houses in terms of size, accommodation and location, the Tribunal had regard to the unique position of this particular estate in that it is subject to a section 106 agreement requiring that the dwelling shall only be sold or let to persons over 55 years old and which also prevents the road from being adopted by Norfolk County Council at any time in the future. Furthermore, the Tribunal is aware that with effect from 17th May 2005, responsibility for management of the estate was officially handed over from the builders to the owners of dwellings in Oakleigh Drive, who are consequently accountable for all works and liabilities in connection with the road and adjacent landscaping.

The Tribunal therefore accepts the appellant's contention that when initially purchasing the appeal dwelling he was aware of only a £50 per annum maintenance charge on his property as Oakleigh Drive comprised a private estate. However, since the official transfer of the estate to the owners' Management Company in May 2005, the Tribunal is aware the annual financial commitment of the appellant has increased significantly due to the additional costs and liabilities inherent with such a private estate. Moreover, the appellant has the additional burden of his property being located on a possible contaminated site with any resulting problems in the future being his liability.

The Tribunal is therefore satisfied that is must look at the actual value of the appeal dwelling with the incumbent restrictions of this particular estate in comparison with a property situated on a standard estate. In its judgment, the restrictions resulting from the section 106 agreement, together with the previously unforeseen financial liability of the newly formed Management Company, are sufficient in magnitude to have an adverse effect upon the open market value of the appeal dwelling to any prospective purchaser. The Tribunal considers this finding reflects the situation where properties with occupancy restrictions of an agricultural nature are recognised by the Listing Officer as having a suppressed open market value.

Accordingly, the Tribunal considers the appeal dwelling would not have achieved an open market figure in excess of £52,000 at 1st April 1991, had current circumstances prevailed at that date. In the Tribunal's opinion, the date of alteration of the existing Council Tax Band should have effect from 17th may 2005, the date from which the official transfer of the estate to the Management Company occurred giving rise to an increased financial liability in respect of the subject property."

16. It is right, as submitted by the Respondent, that the Tribunal was aware that it had to determine the value and the statutory assumptions on the basis of a hypothetical sale on 1st April 1991, and that it disagreed with the comparative approach of the properties put forward by the Appellant. Also the Section 106 restriction would have been present ab initio, as would the possibility of contamination of that part of the site. The obligation to contribute to the maintenance of the running of the common parts also would have applied ab initio from 1st January 2004, and save for the formality of the transfer to the management company which necessarily involved greater expense, the Tribunal came to the conclusion that it would not be appropriate to put it in Band C.
17. There was an issue raised by the court about whether the Valuation Tribunal could take into account post-decision events; in other words, events subsequent to the decision of the Listing Officer. That decision was in January 2004. Mr Marshall raised his proposal in June 2004, but the matter was not heard until November 2005. This, as both counsel have indicated, is a complex area. The Appellant submits that on the facts of this particular case, it was not permissible for the Tribunal to take into account the management company issues as they did, because it is argued that in the appropriate Regulation 6(2) the assumptions are not concerned (particularly subsection (2)(a)) with the machinery of the collection of charges, but merely with the assumption that a contribution would be made to the running or upkeep of common parts. It is accepted that it is difficult to separate out and give weight to the factors relied on by the Valuation Tribunal, and accordingly the Appellant does not argue forcefully against remission.
18. Miss Wicks, on behalf of the Respondent, seeks to preserve the order but in amended form, submitting that the Valuation Tribunal was entitled to take the approach that it did. It was obliged to take into account the fact that this was a private estate with common parts to repair which would necessarily affect the value of the property, especially when compared to those which did not have such obligations. She does accept, however, that the Valuation Tribunal did not ask itself all the right questions. She nevertheless maintains, for the reasons mentioned and other reasons, that the court can and should amend the order. It is pointed out that Mr Marshall has been waiting some time for matters to be determined.
19. It is clear from the arguments of counsel that there are two ways of approaching the findings of fact of the Tribunal. It is difficult on the facts as found, for the court to ascertain what weight was given to each of the aspects which operated on the Tribunal's mind. It is not possible to say whether the decision would have resulted in backdating to 1st January 2004, had the May events not been taken into account, or whether the appeal would have been rejected.
20. Attractive though the parties no doubt would find it for this court to make a final order disposing of the matter, because of the lack of clarity it would, in the court's opinion, be inappropriate and unfair to do so, especially when both sides agree that the Valuation Tribunal did not ask itself all the right questions. This court of is of the view that the fact-finding Tribunal, properly advised of their powers, should reconsider the position. This would enable it to set out with clarity what weight and which aspects of their fact-finding was decisive. Whilst it is of some inconvenience to the parties in this case, it is not a case which has serious financial consequences for the Respondent, Mr Marshall, who has had the benefit of excellent pro-bono representation and who, no doubt, will be able, as he did before, to make able submissions at the hearing, a hearing which will essentially be a matter of clarification for the parties, although of course it does raise the possibility of a different outcome.
21. The order of the court, therefore, is that the decision of the Valuation Tribunal be set aside and be remitted to the Tribunal for reconsideration.
22. MR MORSHEAD: My Lady, I am grateful. Would your Ladyship order that the decision be set aside and remitted for reconsideration by a differently constituted panel? It would appear to us that that might be an appropriate precaution to take in a case of this sort. I am not sure if you need elaboration on that.
23. MRS JUSTICE DOBBS: Miss Wicks, what are your thoughts?
24. MISS WICKS: My Lady, the risk is clearly that a differently constituted Tribunal will start from a completely different basis, whereas what your Ladyship is trying to achieve is really to direct the Tribunal to look at it against the proper legal framework. I resist it going back to a differently constituted Tribunal for that reason.
25. MRS JUSTICE DOBBS: I did have in mind, Mr Morshead, that it would be the same Tribunal. Looking at it as against the error that they made, they would know what their findings were and, against that background, apply the law. That is my feeling.
26. MR MORSHEAD: The concern, I suppose, would be really the one that Miss Wicks has just articulated: that the Tribunal coming back at this will start from the approach that was already taken.
27. MRS JUSTICE DOBBS: They can start from the findings of fact that they have made but properly directed.
28. MR MORSHEAD: I can put the concern in this way. Your Ladyship appreciates the way the Tribunal finds facts. It is partly affected by the legal framework it has set for itself. So to ask a Tribunal to go back to its findings of fact, armed with a fresh new framework, particularly in the valuation context where the difference between principle and judgment is sometimes an elusive one, is perhaps to ask the Tribunal to undertake a slightly more difficult task than it is likely to be equipped to undertake, bearing in mind that they are essentially a Tribunal with some expertise.
29. MRS JUSTICE DOBBS: Why should it be more difficult for them than a new bench?
30. MR MORSHEAD: The advantage that the new bench will have is that they will approach the matter with a fresh frame of mind, with the advantage of your Ladyship's judgment to guide them and to avoid the error which has taken place, as distinct from the same lay people who must set about unpicking their earlier judgment, in light of your Ladyship's judgment.
31. MRS JUSTICE DOBBS: All they have to do is look at the 17th May argument to work out whether in fact they were justified in taking that into account, which would be an argument that we have just had in court. That is about it, is it not?
32. MR MORSHEAD: One can perhaps test it the other way. Is your Ladyship going so far as to direct that the determination must take place by the same Tribunal?
33. MRS JUSTICE DOBBS: I was not prepared to order that a different bench hear it. I was going to leave it to the discretion of those who organise it. It may well be that the same bench is unavailable, and therefore I could not direct that, for instance, if the lay people had retired since.
34. MR MORSHEAD: Indeed, but it does rather highlight the problem that we face. Suppose, for example, one then ends up with a hybrid situation. You have one member who did hear the original application, another who did not.
35. MRS JUSTICE DOBBS: I can order that it goes back for reconsideration save that there will not be a hybrid Tribunal.
36. MR MORSHEAD: That might be a way round it.
37. MRS JUSTICE DOBBS: I can certainly do that.
38. MR MORSHEAD: Our concerns are not theoretical, my Lady. We are just anxious to ensure that whatever does take place is consistent with fairness. It may be that that is a sensible compromise.
39. MRS JUSTICE DOBBS: Yes. I think that is what I will do. I did not want to be unduly restrictive.
40. MR MORSHEAD: I follow that.
41. MISS WICKS: My Lady, I do not oppose that.
42. MRS JUSTICE DOBBS: The order will be to that effect. It will be remitted to the Tribunal for reconsideration, save that the Tribunal may not be a mixed Tribunal; that is a mixture of original members and new members. It is either the same constitution or it is a new one.
43. MR MORSHEAD: I am grateful.
44. MISS WICKS: Thank you, my Lady.
45. MRS JUSTICE DOBBS: Thank you very much.