England and Wales Lands Tribunal

[2003] EWLands RA_10_2002 (21 March 2003)

RA/10/2002

LANDS TRIBUNAL ACT 1949

General Rate Act, 1967, s.115(1) – Meaning of hereditament – Non-contiguous properties in single occupation – structurally and geographically separated – Functional connection insufficient to justify finding single hereditament

IN THE MATTER of an APPEAL against the DECISION of the

EAST YORKSHIRE VALUATION Tribunal

by

JOHN PHILIPS EVANS

(Valuation Officer)

Re: (1) Workshop & Premises

Unit 2, Anchor Trading Park

Wiltshire Road,

Hull HU4 6PQ

(2) Factory & Premises,

RLM Packaging, Wiltshire Road

Hull H4 6HP

Before: Judge Michael Rich QC

Sitting at: 48/49 Chancery Lane, London WC2A 1JR

on 20 March 2003

The following cases are referred to in this decision:

Butterley Co Ltd v Tasker (1961) 7 RRL 2

Edwards (VO) v B P Refinery (Llandarsey) Ltd [1974] RA 1

Gilbert v Hickinbottom [1956] 2 QB 40

Harris Graphics Ltd v Williams (VO) [1989] RA 211

F Smales and Son Ltd appeal to East Yorkshire Valuation Tribunal (14 March 2001)


 


DECISION

1. This is an appeal against the decision of the East Yorkshire Valuation Tribunal dated 6 December 2001 whereby they deleted the existing entries in the 1995 valuation list in respect of a factory and premises known as RLM Packaging, Wiltshire Road, Hull (which I shall refer to as the "Main Factory") and Workshop and Premises known as Unit 2 Anchor Trading Park, Wiltshire Road (which I shall refer to as "Unit 2") and to enter them both as a single hereditament with effect from 1 July 1998. They are non-contiguous properties, but were in the single occupation of RLM Packaging Limited. Since the decision however that company has ceased to occupy Unit 2 and has taken up occupation of premises contiguous to the Main Factory. The 2000 valuation list has accordingly been altered to enter the Main Factory together with those new additional premises as a single hereditament with effect from 1 April 2002. Any proposal in respect of the 2000 list for its first two years has remained in abeyance pending this appeal. It is in those circumstances that the ratepayer has not responded to this appeal.
2. Section 42(1) of the Local Government Finance Act 1988 requires that the local non-domestic rating list must show each "hereditament" which satisfies the relevant conditions for charging. By section 64(1):

"a hereditament is anything which by virtue of section 115 subsection 1 of the 1967 Act would have been a hereditament for the purposes of that Act …"

By section 115 of the General Rate Act 1967:

" 'hereditament' means property which is or may become liable to a rate, being a unit of such property which is, or would fall to be, shown as a separate item in the valuation list."

The Valuation Tribunal thus had to apply the law as to whether properties would fall to be shown as one unit or two units, as established for the purposes of the 1967 Act.

3. In their decision the Valuation Tribunal set out, in a way which the Valuation Officer does not criticise, the law as declared by the Court of Appeal in the leading case of Gilbert v Hickinbottom ...1956) 2 QB 40. They recited the dictum of Morris LJ at page 53:

"If in one occupation there are several buildings capable of being separately let, which are not within a common enclosure or curtilage but which are physically separated, and are interspersed among other buildings and other occupations, in such circumstances it would hardly be possible to regard them as comprising one hereditament, even though they were all used for a common purpose. The mere fact of a community of use or purpose would almost certainly in such case, in view of the other circumstances (such as the structure or geographical separation of the buildings, their dispersion among other buildings, and their capability of being separately let) be held not be sufficient to warrant buildings being considered as one hereditament."

Nevertheless, the Valuation Tribunal came to the conclusion that

"the degree of functional connection between the two properties is so great that this factor overrides the geographical separation between the properties and also the intervening separate occupation in between".

Although I find that conclusion as surprising as did Denning LJ the decision of the Lands Tribunal the subject of the appeal in Gilbert's case, I do not think that it can be said to involve an error of law anymore than the Lands Tribunal's decision in Gilbert's case involved such error. The appeal to the Lands Tribunal from the Valuation Tribunal is however by way of rehearing, and my decision accordingly must be based on the facts as agreed or proved before me.

4. The Valuation Officer gave evidence as follows:-

"The appeal hereditaments consist of:

The Main Factory

a. a 1970s detached portal frame factory building of 1100 sq m constructed of block and profiled steel cladding under a pitched and lined asbestos covered roof with PVC roof lights. The property has a concrete floor a front external canopy and access is via a roller shutter door. The property has gas warm air heating, electric lighting and power main water and drainage. The eaves height is of asymmetric pitch of 3.5 metres and 2.5 metres approximately. The ridge is 4m in height. The yard is surfaced and drained and enclosed by steel fencing with 2 sets of double gates. The property is situated and known as RLM Packaging Limited, Wiltshire Road, Hull HU4 6HP; and

Unit 2

b. a 1920s/1930s factory building 259.3 sq m of traditional brick construction and is formed from a larger industrial building previously occupied by the Metal Box company Ltd. It has a mono pitched lattice trussed roof covered with asbestos sheeting. The property has a concrete floor, a front external canopy and access is via a roller shutter door. The property has electric lighting and power mains water and drainage, but no heating. The eaves height is 5.2 metres approximately. The property is situated and known as Unit 2 Anchor Trading Park, Wiltshire Road, Hull HU4 6PQ and is accessed by what I understand to be a narrow private roadway;

There are at least 3 intervening hereditaments – taken 'as the crow flies'. If taken along the estate road, goods exit to goods entrance, then there are 7 intervening properties. The distances involved are approximately 250m – 'as the crow flies' and 380m – when measured along the road, goods exit to goods entrance including the private roadway leading to unit 2 of 55 metres. The figures used at the valuation tribunal were 325m and 30m but the latter figure must now be regarded as incorrect.

Occupation and Use of the Premises

A letter from Rogerson Associates dated 17^th August 2001 outlines the position with regard to the manufacturing process and staffing movements. A copy is shown at exhibit JPE 5.

'Staff – The planning and management of the press shop (Unit 2) is controlled from the main factory. There are currently 24 direct operatives and they are split between the 2 sites. They are transferred from one site to the other depending on the skills required and at time this can require more than 3 or 4 transfers a day of the same people. RLM Packaging employ a van for 90% of the time and a forklift driver for 50% of the time to run between the 2 sites.'

'Manufacturing Process – Tin plate is brought into the main factory where it is cut and transferred by van to the press shop (unit 2), this tin plate is then formed into components. Part of this process can involve a split where some of the operations are done at the main factory and again returned for completion at the press department. A very good example of this are the hydraulic brake tanks, which during manufacture can be transferred 3 or 4 times during their manufacturing cycle. There are other examples such as gas masks sysemic containers and the lids that are manufactured for all containers.' "

That letter continued as follows:

"All despatches are from the Main Factory, which includes all the items from the workshop. To quote from RLM Packaging 'we as a business would much prefer the two sites under one roof due to the dependency of one to the other. One site could not operate without the other'".

The Valuation Officer does not dispute what is there written at least to the extent that Unit 2 could not operate without the Main Factory. The Main Factory however, whilst needing the use of the pressing machine housed in Unit 2, could operate if such facility were housed elsewhere than in Unit 2, as it now does and did before Unit 2 was acquired.

5. The Valuation Officer in drafting a proposed agreed statement of facts added this as to the nature of the production at each property.

"There are essentially 4 production lines at the Main Factory. They consist of Line '1', Line '3', Line 'C' and Line 'D'. The lines make a range of pails and metal containers but Line 3 is more concerned with short run orders and the specialist items such as brake cylinders and gas masks.

Unit 2 is solely concerned with the manufacture of canister tops, rings and ends. The tinplate for these arrives at the Main Factory and is unpacked and cut into strips before being transported by van (with fork lift truck assistance) to unit 2. At unit 2 the strips are pressed into the shape and size to form the appropriate lid/top, ring or end.

The lids or tops are then packaged and returned by van with forklift assistance to the Main Factory for dispatch. The lids/tops are supplied to the client separately packaged from the matching container."

Although the ratepayer has not agreed this part of the draft statement Mr Evans confirmed it in evidence before the Tribunal, and I accept it subject to the observation of the ratepayer that some components have to go to the press department in Unit 2 more than once.

6. The Valuation Officer adds that the manufacturing process is not time-critical. The goods are not delicate or perishable. The products finished in Unit 2 and in the Main Factory are stocked piled before despatched. I accept that however inconvenient it might be, a substantial increase in the distance between the two sites, even if one is, in the sense explained, necessary to the other, would not materially affect the production process.
7. It is clear that the buildings are entirely separate structurally, and were capable of being separately let, as indeed historically they had been and as they now are.
8. In applying the law to those facts, it is important to distinguish the decisions of the Court of Appeal which are decisions as to the law, and not as to fact, and the decisions of the Lands Tribunal or Valuation Tribunals which may be persuasive authority on matters of law, but are decisions on matters of fact, which are, in each case, unique. The factual position considered in such cases, may provide useful guidance as to how the law should be applied in similar cases but in every case it is for the tribunal of fact to determine as a matter of fact and degree whether two geographically separated premises constitute a single unit of occupation when occupied by the same occupier.
9. Since no issue of law arises in this appeal, it is not necessary for me to undertake an analysis of the decisions of the Court of Appeal in Gilbert's case and in Butterley Co Ltd v Tasker 1961 7 RRC 213. I entirely agree with the summary stated by the Lands Tribunal (Mr Stuart Daniels QC and Mr Emlyn Jones FRICS) in Edwards (VO) v BP Refinery (Landarsey) Ltd 1974 RA 1 at page 37 where they said:

"Consideration of these two cases leads us to the conclusion that two separate properties which are not directly and physically contiguous could not properly be regarded as a single hereditament for rating purposes unless firstly, there is an essential functional link between the two parts and secondly, that there is also a substantial degree of propinquity. One might perhaps consider the analogy of a sparking plug where the gap between the parts is so small that it can physically be traversed in the course of the functioning of the whole. It might also be true to say that the stronger the spark the greater the gap which can be traversed."

I adopt that useful analogy.

10. It is not in my judgment impossible as a matter of law that properties separated by other hereditaments rather than by a highway may yet be part of a single hereditament: if it were otherwise properties separated by a single building on the same side of the road would be less easily held to be the same hereditament than more widely separated properties on opposite sides of the road. Nevertheless a gap consisting not only of other hereditaments but also, as in the present case, of a journey of 380 metres would, in my judgment, require an exceptional spark in the form of a functional link for the Tribunal to conclude, as a matter of fact, that such properties were not merely two properties being used in the same business, but were a single unit. What is, in my judgment, established in the present case is no more than a community of use and purpose such as Morris LJ referred to as being almost certainly insufficient to override the structural and geographical separation of buildings capable of being separately let. The transfer of goods and people between the buildings is, in my judgment, a function of the identity of business.
11. Whether on the facts, the same LVT were right to conclude that the premises of F. Smales and Son Ltd at 30 and 101 West Dock Road, Hull did constitute a separate hereditament is not for my determination. The gap in that case is smaller and the functional link appears to have been greater: the LVT held that in that case there was a single production line extending between the two premises. That is certainly not a finding that, on the evidence before this Tribunal, I could arrive at in the present case.
12. This case differs also from the case of Harris Graphics Ltd v Williams (VO) 1989 RA 211, where Mr Mallett FRICS sitting in this Tribunal found the particular degree of interdependence between buildings only 120 ft apart did justify a finding that they constituted a single hereditament. The evidence in that case was of a stronger connection over a smaller distance than in the present case. The Member said at page 219

"There is a regular to and fro traffic of personnel for the purpose of transporting materials by hand, or transporting and assembling by hand, the to and fro traffic of personnel concerned with supervising , checking and testing of the machines being assembled. There is the to and fro traffic of trolleys carrying materials, and forklift trucks carrying part assembled machines. The distance to be covered is not great but it is possible to use the service road for this purpose."

13. My decision on this appeal is that the functional link which has been proved in this case is not sufficient to justify treating two significantly separated properties as a single hereditament. I would therefore allow this appeal accordingly and reinstate the separate descriptions of the Main Factory and Unit 2 in the 1995 list. No application has been made for costs.

Dated 21 March 2003

(Signed) His Honour Judge Michael Rich QC